Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MCDERMOTT SCOTLAND ORDER CONFIRMATION BILL

Considered; to be read the Third time upon Tuesday next.

Oral Answers to Questions — HOME DEPARTMENT

Pensioners (Television Licences)

Mrs. Joyce Butler: asked the Secretary of State for the Home Department what progress he has made in his examination of the possibility of relieving pensioners of part or all of the cost of television licences; and if he will make a statement.

The Minister of State, Home Office (Mr. Alexander W. Lyon): As I stated in reply to a Question by my hon. Friend on 19th March, we hope that this study will be completed before the Summer Recess.—[Vol. 888, c. 457.]

Mrs. Butler: Does my hon. Friend realise, however, that unless he can speed up this study, many pensioners—and they are the people who are hardest hit by the present inflation and economic stringency—will have to give up viewing television altogether? Cannot he come forward quickly with some scheme, even if it is only for half-price licences for black and white sets, to enable those most in need to carry on enjoying one of their very few remaining pleasures?

Mr. Lyon: As I indicated in the debate that we had on my hon. Friend's Bill, we are very conscious of the burden that

falls on elderly people, and we are doing our best to see whether there is a way of relieving it. We are at present studying all the alternatives.

Mr. Farr: Is the hon. Gentleman aware that two or three years ago, when a Bill was introduced to help elderly people with television licences, and his party was in opposition, it expressed great support for the idea and indicated that it would do something about it when it was in office? What is the hon. Gentleman going to do about it now?

Mr. Lyon: That is one of the reasons why we are having the review.

Mr. Noble: Will my hon. Friend accept that while the increase in the licence fee itself is a cause of great hardship, the very fact that the fee has been increased while a small minority of pensioners pay only the 5p because they are in sheltered accommodation has resulted in an increase in bitterness? This cannot be a healthy situation, particularly among old people. Will my hon. Friend contact his right hon. Friend in the Department of Health and Social Security to see whether something can be done about this matter when the next pension increase takes place?

Mr. Lyon: Of course, it is this anomaly which has caused much of the dissatisfaction. The anomaly was created by a concession that was made by the previous Labour Government in response to just such a demand as has been echoed here today. It points the difficulty about making any further extension.

Mrs. Bain: Is the hon. Gentleman aware of the fact that within sheltered housing communities for old-age pensioners, one television licence may cover 25 sets? If he accepts this principle, does he not agree that it would be a good idea to extend it outwith, into the community as a whole, thereby allowing old-age pensioners' societies to buy, perhaps, one television licence to cover 25 or 30 sets which are in the households of old-age pensioners?

Mr. Lyon: We are considering all the possible ways in which an extension could be granted, but I suspect that that one would he more anomalous than some of those we have under consideration.

Immigration

Mr. Ian Gilmour: asked the Secretary of State for the Home Department what criteria he uses in deciding whether or not to grant the right of permanent settlement in Great Britain to applicants who initially entered this country subject to conditions.

The Secretary of State for the Home Department (Mr. Roy Jenkins): The general criteria are set out in the Immigration Rules for Control after Entry and include such categories as people who have been in approved employment for four years, people with a grandparent born here, and those who marry a person settled here. In addition, we revoke the conditions of Commonwealth and Pakistani citizens who were granted immunity from deportation by the Immigration Act 1971 if they were ordinarily resident here on 1st January 1973 and have been so resident for five years: revocation of their conditions is a recognition of the facts and does not constitute an addition to the numbers of immigrants settled here.

Mr. Gilmour: Is it not a fact, however, that about 20,000 people from the Commonwealth who were accepted for settlement last year initially came in under conditions, which is about 10,000 up on the figure for 1973—about double? Is it not also a fact that the figure for the first quarter is over 5,000? Will the Home Secretary therefore accept that it is every bit as important to exercise strict control over the numbers of those who are accepted for settlement having come here initially under conditions as it is to exercise control over those who come here for settlement in the first place?

Mr. Jenkins: I accept the general proposition, subject to the fact that where people are settled here, I think that it is not right to keep them indefinitely in a position of insecurity, and I do not think it is right to have split families. The right hon. Gentleman's figure for last year is approximately but not absolutely correct. It was 18,959, just under 19,000. Of these, 5,000-odd were accepted by reasons of marriage, 5,700 after lawful residence, and 1,400 after unlawful residence—as a result of the five-year "amnesty" provision in the 1971 Act—which,

while a significant figure, was very much less than the figures which were bandied about at the time. The figure for the first quarter is 5,200, which is a little up but not significantly different from the figure for 1974.

Mr. Lane: What relaxations have there been in the system for controlling the entry of dependants into this country as a result of the Minister of State's recent visit to the Indian sub-continent?

Mr. Jenkins: We are looking at this matter carefully at the present time. I am sure the whole House will agree that it is difficult to defend the present position under which a wife can have a first interview and then be asked to attend a second interview, 21 or 22 months later. I am endeavouring, as far as is compatible with reasonable and effective control, to speed up and simplify the procedure. I am sure the hon. Gentleman would not wish to justify a position in which the wives of people who are settled here and who are entitled to come, have to go through the process of one interview followed by another nearly two years later.

Jersey Cattle

Dr. Edmund Marshall: asked the Secretary of State for the Home Department if he will take action designed to protect the pure breed of Jersey cattle against any import of cattle to the Island of Jersey which might be permitted by European Community legislation.

The Under-Secretary of State for the Home Department (Dr. Shirley Summerskill): The Jersey authorities have been kept informed about the Commission's proposals designed to facilitate trade in breeding cattle within the Community, and they have made no representations against them. My right hon. Friend will be happy to consider in consultation with my right hon. Friend the Minister of Agriculture, Fisheries and Food, any representations that they may wish to make.

Dr. Marshall: Does my hon. Friend realise that there is great concern in Jersey because in 1978, when the transitional period of entry into the European Economic Community ends, the present arrangements within the Community will allow for imports of cattle to the island?


Is she aware that the local pedigree breed has been kept absolutely pure for 200 years and that it might now have to contend with rival groups? Will the Government approach the Community to prevent such an occurrence?

Dr. Summerskill: We have consulted all the island Governments since December 1972 about the progress of the draft instrument designed to provide the maximum freedom of movement for breeding cattle. We have received no representations on the subject from the authorities in Jersey.

Television (Wales)

Mr. Gwynfor Evans: asked the Secretary of State for the Home Department what provisions he is making for implementing the decision to use the fourth television channel as a national channel in Wales.

Mr. Tom Ellis: asked the Secretary of State for the Home Department when he expects to receive the report of the committee appointed following publication of the Crawford Report to consider the use of the fourth television channel in Wales.

Mr. Wigley: asked the Secretary of State for the Home Department whether the recent Government review of public expenditure in any way affects the Government's laws for implementing the recommendations of the Crawford Committee on broadcasting.

Mr. Alexander W. Lyon: The working party whose terms of reference were announced by my right hon. Friend the Secretary of State for Wales on 16th January—[Vol. 884, c. 176.]—has just reported. We shall make a further statement when there has been an opportunity of studying the working party's report.

Mr. Evans: Is the hon. Gentleman aware that the power of English television which fills almost every Welsh home imperils the very existence of the Welsh language? Does he recognise that it is as important to defend our language, which is part of our national culture, as it is to defend our physical existence? Will the Government look on this as a matter of the defence of a nation, of a national life and a national culture? Does

the Minister realise that our language is a vehicle of our culture, and will the Government be prepared to spend as much on this kind of defence as they spend on arms?

Mr. Lyon: We accept the importance of the Welsh langauge to the preservation of the culture of Wales and we have taken a decision to help in this way if we can. We are waiting for the technical report from the working party and will announce our decision as soon as possible.

Mr. Ellis: Is my hon. Friend aware that the survival and growth of the Welsh language is of fundamental importance to many people in Wales and that pleas on its behalf should not be regarded as a case of special pleading? Does he realise that a Welsh language television service would be of prime importance to the survival of the language, and that time is desperately short? Will he devote himself, despite his other heavy commitments, to achieving very quickly an effective Welsh language service on the fourth channel?

Mr. Lyon: Policy decisions are not for me, although I answer for them in the House. I am sure my right hon. Friends will deal with this matter as expeditiously as possible.

Mr. Wigley: Will the hon. Gentleman convey to those who do take the policy decisions in this matter that there is a desire in Wales among Welsh speaking and non-Welsh speaking people to see this development in order to give fair play to both languages? Can he assure us that current cut-backs in expenditure which may be contemplated will not hit this sort of project?

Mr. Lyon: I think the hon. Gentleman must await the announcement, but what has been said in the past ought to reassure him.

Forensic Science Laboratory

Mr. Dalyell: asked the Secretary of State for the Home Department if he will make an official visit to the Forensic Science Laboratory, Lambeth.

Mr. Alexander W. Lyon: My right hon. Friend hopes to do so on a suitable occasion.

Mr. Dalyell: In relation to my hon. Friend's reply of 19th June, is he suggesting that he was told by Dr. Margaret Pereira and her colleagues that it might not be scientifically possible to derive benefit from information about blood sample data both in catching criminals and in saving valuable detective time?

Mr. Lyon: I am grateful to my hon. Friend for allowing me to clear up this matter. I suspect that on his visit, when he saw Dr. Pereria, who is a senior principal scientific officer, he was given an estimate about the effectiveness of this—an estimate which was not entirely shared by the Controller of the Forensic Science Service or the Director of the Metropolitan Police Laboratory. As a result, we are getting different advice, but my advice is that it is not yet scientifically possible to set up a blood bank national service in the way he espoused and that, before we can take a decision on this matter, there must be further scientific progress.

Illegal Immigration

Mr. Mather: asked the Secretary of State for the Home Department if he will make a statement about the operation of the controls on illegal immigration.

Mr. Alison: asked the Secretary of State for the Home Department what steps he intends to take to improve the existing arrangements for preventing illegal immigration from the Commonwealth.

Mr. Alexander W. Lyon: The Immigration Service and the police are constantly on the alert to prevent illegal entry. They already take all reasonable and practicable measures to stop evasion of the immigration control, but we shall keep these measures under review and, in the light of experience, they may be adjusted from time to time.

Mr. Mather: Can the hon. Gentleman confirm recent Press reports that during the first quarter of this year, 1,500 immigrants were smuggled into this country? Is he aware that this figure, which represents about one-quarter of the total number of immigrants and dependants admitted each year, is far higher than the public have been led to believe? Does he agree that this is a scandalous situation at a time of high unemployment, and

will he make representations through the usual channels to those Continental countries which may be harbouring these immigrants and the headquarters of their smuggling organisations?

Mr. Lyon: The report which has upset the hon Gentleman appeared in the Sunday Telegraph three weeks ago and was a scandalous falsehood. It is not true—there is no basis in fact for the assertion—that there is a Home Office report, or that there was any estimate of the figure of illegal immigrants. By the very nature of the operation, there could not be. I can assure the hon. Gentleman that, from all the facts in my possession, I suspect that the estimates given for illegal immigrants are wildly exaggerated.

Mr. Alison: Does the hon. Gentleman therefore believe that the figure published in the official Home Office statement on 19th June that, in the first quarter of this year, there were 56 illegal immigrants, is as accurate as he claims the other report is inaccurate? Would it not be better for everybody for a realistic estimate to be made of the real scale of illegal immigration, since uncertainty merely stokes up irrational fears?

Mr. Lyon: Then it should not be assisted by the Opposition Front Bench. The figure of 56 is a factual statement of how many illegal immigrants were sent back. Those are the people we knew about and sent back. Any other estimate about the number of illegal immigrants can only be an estimate and, while we accept that there are, no doubt, many illegal immigrants, the figures are, in my view, well below any of the published estimates, although that must be an opinion.

Prisoners (Civil Rights)

Mr Kilroy-Silk: asked the Secretary of State for the Home Department whether he has any plans to change the Prison Rules.

Mr. Douglas-Mann: asked the Secretary of State for the Home Department whether he will make a statement about the civil rights of those serving sentences of imprisonment.

Mr. Roy Jenkins: As I explained in reply to a Question on 19th June by my hon. Friend the Member for Woolwich, East (Mr. Cartwright)—[Vol. 893,


c. 1645–7]—I am reviewing certain aspects of the treatment of prisoners and restrictions on their communication with non-prisoners. I shall announce the result of these reviews when they are completed.

Mr. Kilroy-Silk: Is my right hon. Friend aware that we are grateful for that answer, but will he not consider making provision for prisoners to be legally represented in a court when they are charged with an in-prison offence which carries with it a loss of remission? Docs he not accept that the loss of liberty, on some occasions for several months, should be determined by a judicial authority and not by a prison authority?

Mr. Jenkins: I do not think I can accept that. To introduce a judicial procedure into any in-prison punishment, which is what my hon. Friend's suggestion might mean, would be very cumbersome. I shall consider any question he puts to me, but in view of the position in the courts, which in many ways are already jammed up, to remove from any non-judicial procedure the award of any punishment within prisons would be an extremely difficult thing to do.

Mr. Douglas-Mann: A person suffering from a legitimate sense of grievance is more likely to become a permanent enemy of society than one who is justly treated. Is it not therefore desirable that the system of allocating prisoners to control units, which are a complete outrage of the principles of natural justice, should be abandoned and that the decision of the Court of Human Rights with regard to the communication by prisoners with their MPs and lawyers should be implemented? Does my right hon. Friend consider that the events disclosed and admitted at the Birmingham bomb trial would have come to light if the prisoners concerned had not been awaiting trial, but had been convicted prisoners denied access to lawyers?

Mr. Jenkins: The last point is as sub judice as anything can be at the present time, and it would be inappropriate for me to comment on that. As for allocation to control units, there is a later Question about this matter which I think will be reached, and perhaps the House would be prepared to wait until we reach it.
I entirely agree with my hon. Friend on the general proposition that it is desirable to treat prisoners justly. We shall give effect to the Golder judgment, but there are certain situations which have to be reviewed, and I hope to announce the conclusions of the review before the recess.

Mr. Nelson: Will the right hon. Gentleman consider including in the things which the review body will examine the basic right of people in prison to write to their Member of Parliament unfettered by the powers of censorship which exist under the Prison Rules?

Mr. Jenkins: As I said in a reply about a month ago, I am anxious to reduce the powers of censorship. However, the only valid reason for the power of censorship of letters to Members of Parliament is that on the whole it is important that prisoners should go through the proper procedure of making complaints internally before they write outside. Although I am sure that he has great experience of these matters, I do not think that the hon. Member would find it possible to operate a prison system otherwise.

Mr. Mikardo: Further to the point raised by the hon. Member for Chichester (Mr. Nelson), will my right hon. Friend consider whether it is right that a letter from a prisoner to his lawyers should be free of censorship only after the prisoner has decided to enter into litigation? Does he not agree that the correspondence which passes between a prisoner and his lawyer in deciding whether there should be litigation is often more sensitive than that that which passes after the decision? Ought not the prisoner to have the right of free consultation with his lawyers to decide whether or not he wants to enter into litigation?

Mr. Jenkins: It appeared to me, as listened to the question my hon. Friend was posing, that an important issue might be involved here, and I shall happily consider, and am considering as part of the review, the point he has raised. It would be possible for a prisoner to use communication with his lawyers to get round a number of the Prison Rules in a way which would not be desirable, but I see some force on the immediate point


that my hon. Friend has put to me and I shall discuss it.

Crime Prevention

Mr. Rees-Davies: asked the Secretary of State for the Home Department whether he will consider as a matter of urgency the introduction of measures designed to create a national criminal investigation department to tackle the incidence of serious crime and to set up such a scheme upon a regional basis but under his control; and if he will make a statement.

Mr. Roy Jenkins: No, Sir. I do not believe that it would be right to separate the CID from the police as a whole.

Mr. Rees-Davies: In view of that rather slender answer, perhaps I may draw the Home Secretary a bit further. Is he aware that in 1974 there was a heavy increase in indictable crime, particularly among juveniles, a 19 per cent. increase in burglary, and a decrease in the manpower of the police force? However, bearing in mind the improvement in the efficiency of the force resulting from the co-ordination of the Flying Squad, the Robbery Squad and the Regional Crime Squad, will he now extend criminal investigation co-ordination on a national basis, in particular to this extent? Will he set up divisional crime squads on a regional basis, nation-wide, and will he introduce measures which would greatly assist recruitment throughout the country if young persons felt they could become detectives quickly in the battle against crime without having to spend a long time on the beat?

Mr. Jenkins: My original reply was not so much slender as direct, and it was direct because I almost wholly disagree with the hon. and learned Member on this point. A high degree of co-ordination is necessary, such as we have been constantly fostering, between the detective forces and the CID in different parts of the country. I profoundly believe, and a great deal of experience has shown—this view is shared by the most important and senior police officers—that to have a CID rigidly separated from the rest of the police force gives rise to grave disadvantages and dangers, and a great deal of the work which the present Commissioner has done has been directed to that

very problem. I am not therefore prepared to move in the direction that the hon. and learned Member suggests.

Mr. Mather: Does the Home Secretary deny recent Press reports that he is considering a national force of detectives?

Mr. Jenkins: I have made it quite clear that I believe in the closest coordination for effective operations between the CID and the police forces in their other aspects so long as we have, as I believe we shall have for a long time, approximately 40 police forces under local control and one metropolitan police force. That system has considerable advantages. I believe there would be grave disadvantages in separating off the detective work and making detectives a completely separate corps from the rest of the police.

Police (Complaints)

Mr. Hooley: asked he Secretary of State for the Home Department when he expects to make an announcement about independent investigation of complaints against the police.

Mr. Roy Jenkins: I would refer my hon. Friend to the answer I gave to a Question from my hon. Friend the Member for Derby, North (Mr. Whitehead) on 15th July.—[Vol. 895, c. 423–8.]

Mr. Hooley: Is my right hon. Friend aware that I read that answer with great care and that in certain respects it is extremely disappointing to Labour Members? Does he agree that an independent element of invesigation of complaints is not enough? What is needed is an independant system which has integrity and which is absolutely independent of the police, if confidence in this aspect of investigation is to be won from the public.

Mr. Jenkins: I do not agree with my hon. Friend. It has been entirely desirable to introduce an independent element, and that, I believe, has been effectively done. I believe this goes well beyond the scheme proposed by the right hon. Member for Carshalton (Mr. Carr), though that was a considerable advance on anything hitherto proposed. I believe that the independent element here is real and effective, but in the situation in which 17,000 or so complaints have to be dealt with each year I have to have regard to


what is administratively practical and what is compatible with the functioning of an effective police service combined with reasonable investigation of the serious complaints. After consideration of this matter I think I have struck a reasonable balance. It would not be right to go on without an effective and fully independent element. Equally, it would not be right to erect a procedure by which the police force was hardly able to function as a police force and became entirely a body for investigating or assisting in the investigation of complaints.

Mr. Beith: I welcome the progress made in bringing forward the outline scheme. It would have been more helpful if the House had been able to discuss the subject a week ago instead of having a Written Answer a few days later. Will the Home Secretary spell out the position of a constable who feels that a malicious complaint has been made against him and who wishes to have redress? There has been Press comment on this matter.

Mr. Jenkins: We always try to bring proposals forward as soon as we reasonably can. The subject of the debate chosen by the Opposition was police recruitment. Therefore, it did not directly include this matter. I was anxious to make a statement before Questions today so that supplementary questions could he asked about it.
For the first time I have introduced in the scheme a substantial independent element with powers of investigation. It is important that a constable should have certain protection against malicious complaints. It is already possible for prosecutions to be taken under the Criminal Law Act 1967. I indicated that, in general, chief officers of police should follow the practice which already applies in about one-third of police areas. Unless there are compelling reasons to the contrary, the constable complained about should be able to see the complainant. That will enable the constable—in conjunction with the view taken by the Police Federation—to enjoy a more effective safeguard.

Mr. Whitehead: I commend my right hon. Friend for his pledge to bring legislation before the House and for standing up to pressure from the police authori-

ties that they should become an independent element, which would have been unsuitable. Is my right hon. Friend satisfied that under the outlined proposals every complaint will come before the Commission without the complainant having to make the running himself at each stage, including those cases where the Director of Public Prosecutions recommends that there should not be a prosecution?
Why is it unsuitable for the police constables who have had complaints made against them to have recourse to the commission, just like anyone else?

Mr. Jenkins: I am grateful for my hon. Friend's generally helpful words of commendation. Perhaps that is too strong. However, they were clearly intended to be helpful. He is right in what he says about the police authorities. They have an important role to play. However, I do not think that they would have satisfied the House as being the independent authorities for the purposes with which we are dealing.
The position of the Commission and the Director of Public Prosecutions is that if a case is referred to the Director of Public Prosecutions for possible prosecution, and he decides to prosecute, that settles the matter. However, if he decides not to prosecute there can be no question of disciplinary proceedings for the offence. That principle could not be breached without breaching what I regard as the important principle of double jeopardy. There might be an effront to police disciplinary proceedings. That could be taken up by the deputy chief constable, but there would be the full right for the commission to come in, as in all normal circumstances.
I shall consider my hon. Friend's last point before the legislation is drawn up. However, I have not received any representations on this point from the Police Federation.

Prisoners (Breaches of Discipline)

Mr. Watkinson: asked the Secretary of State for the Home Department if he will consider allowing prisoners representation by a solicitor when they appear before boards of visitors for breaches of prison discipline.

Dr. Summerskill: This matter is within the terms of reference of the departmental


working party which has been reviewing adjudication procedures in Prison Department establishments and whose report we hope to publish shortly. Following publication we shall be seeking the views of boards of visitors—and shall be glad to receive those of other bodies or individuals—not only on the recommendations made in the working party's report but also on the suggestions made in the recent report of the committee chaired by Lord Jellicoe and set up by Justice, the Howard League and NACRO to consider the role of boards of visitors of penal establishments.

Mr. Watkinson: In cases of breaches of discipline, where there is the appearance of judicial hearings, if representations are not allowed, is it not right that the nature of the hearings should be changed to that of an executive performance by the governor? Will the Minister bear in mind the recommendation of Lord Jellicoe's committee that in determining these matters there should be a group of persons other than boards of visitors, such as professional lawyers, who might be involved in deciding the issues?

Dr. Summerskill: The different alternatives are being considered by the working party, which will receive the views of the bodies which it consults.

Mr. Kilroy-Silk: Does my hon. Friend accept that the answer given earlier by my right hon. Friend is disappointing? Does she accept that in sentencing offenders the courts take into account the remission which can be earned? When a prisoner is potentially losing such remission he should in the interests of fairness and equity—never mind the administrative convenience of prisons—be legally represented.

Dr. Summerskill: The Question I am answering concerns breaches of prison discipline and representation before boards of visitors. A case which came before the Court of Appeal in June this year was dismissed. However, the situation has been fully examined and we hope to make a statement as soon as we have received and considered views on it.

Television Licence Fees

Mr. Michael Marshall: asked the Secretary of State for the Home Depart-

ment whether he will give consideration to the possibility of television rental companies collecting television licence fees on behalf of his Department through instalment payments.

Mr. Alexander Lyon: This proposal has been considered, but there are practical difficulties which would outweigh any advantages to be gained.

Mr. Marshall: Is the Minister aware that this is another facet of the problem, which the hon. Member for Wood Green (Mrs. Butler) mentioned earlier, of the real hardship now being suffered by many pensioners and those on low incomes, for whom this is one reasonable form of entertainment? Is the Minister aware that this question follows my correspondence with the noble Lord in another place—the answers to which, I fear, reveal a singular lack of flexibility in the Home Office in considering this problem in its broadest aspects? Will the Minister think again?

Mr. Lyon: I shall convey the hon. Gentleman's comments to my noble Friend. I am sure that the hon. Gentleman can write again. Pensioners have the opportunity of using the savings card scheme if they wish to do so.

Mr. Roderick: Will the Minister reconsider the idea of combining the licence fee with the rental for those subscribers receiving the cable relay system in those areas where reception is not available in any other way? In that way the fee may be reduced, so that the people concerned are not obliged to pay twice over for the same service.

Mr. Lyon: That suggestion will be considered by those who have to make the decisions about the matter.

Mr. Thompson: Does the Minister accept that many of us think that the suggestion contained in the Question is a good one? Does he also accept that many of my constituents find it unjust that they must pay the full licence fee when they enjoy poor reception, or can receive only English or Ulster programmes when they want Scottish programmes, or suffer from all those disabilities.

Mr. Lyon: Even the English sometimes suffer from the English programmes. I assure the hon. Gentleman that the scheme suggested in the original Question


would add greatly to the administrative costs.

Mr. Fernyhough: Since this is almost a universal service, does my hon. Friend think that the time has come to abolish the concept of collecting television licence fees and sending out detector vans, and make this a charge on the general revenue?

Mr. Lyon: That issue comes within the terms of reference of the Annan Committee, which can report to that effect if it wishes.

Prison Building

Mr. Nelson: asked the Secretary of State for the Home Department what is his latest estimate of the cost of the current prison building programme.

Dr. Summerskill: Capital expenditure on prison building in England and Wales in 1975–76 is estimated at £32·1 million. This includes expenditure on additions and improvement to existing etablishments and on staff quarters.
Provision for prison building in England and Wales in the forecasts contained in the White Paper on Public Expenditure of 1978–79—Cmnd. 5879—is £35·3 million in 1976–77, £36·9 million in 197778 and £35·3 million in 1978–79.

Mr. Nelson: Is the Minister aware that approximately 20 per cent. of the prison population of nearly 40,000 consists of people who have not paid fines? Does the hon. Lady believe that imprisonment is the most appropriate way of dealing with defaulters? Does she agree that one way of cutting both the prison population and this massive and unjustified cost of the prison building programme is to accept the recommendation of the Advisory Committee on the Penal System and to institute a system of day fines?

Dr. Summerskill: That is one of the ways in which the prison population might be reduced, but there are others. My right hon. Friend recently made a speech in which he outlined the proposals we have in mind, including an increase in the use of non-custodial penalties.

Mr. Greville Janner: How much of the proposed expenditure on building new prisons is in respect of open prisons? Does my hon. Friend accept that in suitable cases it is both more humane and

more effective to keep as many prisoners as possible in open prisons rather than in the mausoleums dating from the seventeenth, eighteenth and nineteenth centuries, in which most of them are now housed?

Dr. Summerskill: In reply to the last part of my hon. and learned Friend's supplementary question, great efforts are being made and plans are being brought forward to redevelop and improve the outdated Victorian prisons and the hutted camps. The number of open prison places available depends very much on the number of prisoners who are suitable at any one time to be put into an open prison.

Mr. Wells: Will the hon. Lady consider urgently the possibility of selling off the freehold sites of some town centre prisons, thereby establishing open prisons in better locations, as the hon. and learned Member for Leicester, West (Mr. Janner) suggested? Would not that provide a good comercial deal for the prison service for less cash spent by the taxpayer?

Dr. Summerskill: The definition of an open prison does not depend upon where it is located. It depends upon the degree of security it gives. Therefore, the logic of the hon. Gentleman's supplementary question is not clear to me.

Parole

Mr. Grocott: asked the Secretary of State for the Home Department whether he is satisfied with the present working of the parole system.

Mr. Roy Jenkins: I am satisfied that the parole system has made a useful contribution to the reduction of the prison population without appreciable risk to the public, and I am considering in consultation with the Parole Board the possibility of extending the use of parole.

Mr. Grocott: Does not my hon. Friend agree that far too much secrecy surrounds the operation of the parole system, and that at the very least there should be communicated to the prisoner the reason why parole has been refused? Surely it is a matter of concern than 10 per cent. of prisoners do not even apply for parole, presumably because of the stresses, strains and bitter disappointments which they know the system can produce?

Mr. Jenkins: I am aware of the points which my hon. Friend puts. They are amongst matters which I am discussing with the Parole Board. My hon. Friend is not right in assuming that there are not difficulties about the communication of reasons, but I accept that there are arguments on both sides. I do not think that my hon. Friend is right in assuming that the 10 per cent. of prisoners who do not apply for parole would necessarily apply if there were a different system for the communication of reasons and matters of that sort.

Taxi Fares (London)

Mr. Dykes: asked the Secretary of State for the Home Department if he will make a statement on the proposed increase in London Metropolitan taxicab fares.

Dr. Summerskill: We hope very soon to complete our consideration of this claim.

Mr. Dykes: As the Home Department persists in its peculiar and anomalous control over these matters, does the Minister agree that an increase in fares is long overdue and is an inevitable consequence of inflation, however unwelcome it may be to the travelling public? Would not the occasion of such an increase be an opportunity to consolidate all the supplementary charges made by London taxicabs into one basic fare meter operation, and to remove that maddening wall chart which survives from the old fare basis? Will the Minister confirm that the operation of taxicabs to and from Heathrow is now much more satisfactory?

Dr. Summerskill: All these matters are being very carefully considered. We hope to make an announcement next week.

PRESS (LEGISLATION)

Mr. Aitken: asked the Prime Minister if the broadcast by the Secretary of State for Employment on legislation affecting the Press on 15th June represents official Government policy.

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): As the House knows, my right hon. Friend is in Brussels attending the EEC Heads of Government meeting

and in his absence I have been asked to reply.
Yes, Sir.

Mr. Aitken: Is the Lord President aware that in that broadcast the Secretary of State for Employment again championed legislation which would make it possible for one union to gain a powerful monopoly position over all areas of public communication? Does he realise that that monopoly will inevitably be exercised at the expense of all those who want to have access to the media but are not members of the monopoly National Union of Journalists? As the right of access to the media is such a fundamental one, should it not be protected by proper legal safeguards—not by codes and charters—and, best of all, by dropping the Bill altogether?

Mr. Short: No, Sir, I do not agree with that. The Employment Protection Bill contains recognition provisions which will help the small unions, and I hope the hon. Gentleman will look at those provisions.

Mr. Moonman: Will my right hon. Friend say what discussions have taken place with trade unions and employers concerning the important problem of access? In view of the vulnerable state of two newspapers in Fleet Street, will my right hon. Friend give instructions, through the chairman, to the Royal Commission on the Press to produce a shortened report? We are now running into a second year.

Mr. Short: I shall pass on to the Prime Minister my hon. Friend's last suggestion. In reply to the first part of the supplementary question, my right hon. Friend has had numerous and continuing discussions on this matter over the past few weeks, but I cannot enumerate them off the cuff.

Mr. Ashton: Is my right hon. Friend the Deputy Prime Minister aware that there is no valid reason why there should be one industrial relations law for the Press and another one for the rest of industry? Is he aware that many of us are fed up with the Government kowtowing to pressure from the Press and neglecting pressure from their own back benches? Will he tell the Press to take notice of its own editorials on law and order, and that if this law is passed by


the House of Commons the Press will have to obey it?

Mr. Short: There is complete unanimity between my hon. Friend and myself today. If what a large number of Opposition Members are advocating were done, there would be unfair discrimination against the newspaper industry.

Mr. Prior: As the Bill was regarded by the Government as urgent as long ago as last February and we still have not discussed the Lords amendment, would it not be better if the right hon. Gentleman accepted the view of the hon. Member for Basildon (Mr. Moonman) and allowed the matter to go before the Royal Commission on the Press so that a satisfactory arrangement could be reached which might even satisfy the hon. Member for Bassetlaw (Mr. Ashton)?

Mr. Short: No, Sir. As I said, over the past few weeks my right hon. Friend has spent a great deal of time in discussions about the Lords amendment with many people in an effort to reach agreement. The Labour Government try to reach agreement on these matters, unlike Conservative Governments.

TUC AND CBI (TALKS)

Mr. Radice: asked the Prime Minister if he will make a statement on his most recent discussions with the TUC and the CBI.

Mr. Edward Short: I have been asked to reply.
I refer my hon. Friend to the statement which my right hon. Friend made to the House on 11th July.

Mr. Radice: Does my right hon. Friend agree that the support of the NUM Executive for the Government's anti-inflation policy is welcome news? Does he accept that a reduction in the level of unemployment, particularly in the regions, is crucial to the success of the Government's economic policies? Will the Government take a fresh look at all their regional policies?

Mr. Short: I agree with what my hon. Friend said. I am sure that all hon. Members on both sides of the House will welcome the decision made by the miners this morning. In reply to my hon. Friend's second point, I agree with him that the

whole object of our policy is to try to cure inflation without inducing mass unemployment.

Mr. Maurice Macmillan: Will the Leader of the House tell the House whether the talks with the TUC and the CBI have touched on matters concerning the Employment Protection Bill, relating to exemptions from employees' rights similar to the exemptions from contract obligations in the White Paper, which may be necessary if the policy is to be carried out successfully?

Mr. Short: I am afraid that that is a question which the right hon. Gentleman must address to my right hon. Friend. I am afraid that I do not know.

Mr. Watkinson: Will my right hon. Friend tell the House the Government's plans regarding the temporary employment subsidy scheme? When will it be introduced, and when shall we know the full details of the scheme?

Mr. Short: This is a matter which I imagine will be relevant—subject to your ruling, Mr. Speaker—to some of our debates which I am shortly to announce for next week. At the moment these powers are in the Employment Protection Bill.

Mr. Biffen: Was the CBI consulted and did it give its agreement to the role of monitoring wage settlements jointly with the TUC, as allotted to it in the White Paper?

Mr. Short: That role has not been allotted to the CBI. That is not putting the matter quite correctly. As I understand it, the TUC and the CBI agreed to try to work out arrangements for monitoring settlements and informing the Government of them. I understand that it was an agreement in which both sides acquiesced—namely, to set up a monitoring body.

PRIME MINISTER (ENGAGEMENTS)

Mr. Rost: asked the Prime Minister if he will list his official engagements for 17th July.

Mr. Golding: asked the Prime Minister if he will list his official engagements for 17th July 1975.

Mr. Pattie: asked the Prime Minister if he will list his official engagements for 17th July.

Mr. Edward Short: I have been asked to reply.
As the House knows, my right hon. Friend is attending the EEC Heads of Government meeting in Brussels today.

Mr. Rost: If the Prime Minister's evasive double-talk at the Brussels Summit is as damaging to Europe as his contribution over the past 17 months to rising unemployment, inflation and the national disaster at home, would not it be better if in future all the Prime Minister's official engagements were confined to a lush pasture where he could be put out to grass?

Mr. Short: I do not really feel called upon to answer that question. I just wonder—not only today but for some time past—exactly what the hon. Gentleman has brought to our deliberations in the House. He has certainly not brought good parliamentary manners. However, I still have hopes that he will learn them.

Mr. Tom Ellis: Does my right hon. Friend agree that an urgent step towards the full democratisation of the European Parliament would result from direct elections? Is the Prime Minister making the British Government's position clear in Brussels?

Mr. Short: Yes, certainly. I take it that my hon. Friend is referring to Mr. Tindemans' report, which has not yet been produced. The Council may well discuss its approach to the report. We have not committed ourselves in any way to anything on which Mr. Tindemans may report. We shall study the report with great care.

Mr. Pattie: Does not the right hon. Gentleman think that the Prime Minister should seek an early meeting with the BBC in view of the corporation's astonishing admission yesterday that it has recently transmitted raw Communist propaganda to listeners in Portugal?

Mr. Short: I am dealing with a Question about the Prime Minister's engagements today. The supplementary question that the hon. Gentleman has raised has no relation to my right hon. Friend's engagements.

Mr. Greville Janner: When my right hon. Friend is in Brussels, is he proposing to discuss with his fellow Ministers a problem which I understand is plaguing all Common Market countries, namely, unemployment among young people, and, in particular, school leavers? Will my right hon. Friend discuss this matter in order to see whether there is some way in which we can all employ young people in community service projects instead of leaving them unemployed and rotting away?

Mr. Short: As I understand it, discussion of the general position in the Community takes place at these summit meetings. No doubt unemployment is the sort of issue which could arise in such a discussion.

Mrs. Thatcher: The report to which my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) referred, concerning the BBC, appeared today, and the Question is about the Prime Minister's engagements today. Will the right hon. Gentleman give consideration to the substance of what my hon. Friend asked, and see whether the Government, or members of it, will meet the BBC to discuss this important matter?

Mr. Short: I understand, Mr. Speaker, that this is something in the nature of a point of order—[Interruption.] There is a rule that there must be ministerial responsibility for the substance of parliamentary answers. This question is an innovation. I think that this is the second or third time that it has appeared. I will not go outside the limit of the Question, which is about the Prime Minister's engagements today. I have no doubt that my right hon. Friend will be pleased to answer the question about the BBC when he returns.

GOVERNMENT POLICIES

Mr. Tim Renton: asked the Prime Minister whether he remains satisfied with the progress towards achieving the measures contained in Her Majesty's Gracious Speech.

Mr. Adley: asked the Prime Minister if he remains satisfied with the progress made by Her Majesty's Government towards achieving the measures


outlined in Her Majesty's Gracious Speech.

Mr. Blaker: asked the Prime Minister whether he remains satisfied with the progress towards achieving the measures contained in Her Majesty's Gracious Speech.

Mr. Edward Short: I have been asked to reply.
No, Sir—[Interruption.] I am sorry I read the wrong answer, Mr. Speaker. The answer is "Yes, Sir".

Mr. Renton: May I say how disappointed I am that the Lord President did not stick to his unusually frank and honest original answer? Will he re-read the commitment in the Gracious Speech to provide more homes for rent? In view of the continuing shortage of public funds, what action will the Government take to drop their doctrinaire approach to housing, so as to stimulate homeownership and provide more rented homes by allowing a form of short-term lease that does not confer long-term security?

Mr. Short: I am surprised that the hon. Gentleman has raised this matter. It is something that I did not anticipate. The hon. Gentleman seems not to have studied the housing figures. There has been an enormous increase in the number of new houses built.

Mrs. Renée Short: Will my right hon Friend consider the matter and return to his first reply? Is he aware that we are all concerned about our commitment—it has been given over and over again—to maintain full employment? Is he aware that in my constituency the firm of NVT is very alarmed at the non-publication of the report that, I understand, has now been presented to his right hon. Friend? We are anxious to have a debate on the report as soon as possible. Will my right hon. Friend take this matter on hoard and see whether some undertakings can be given?

Mr. Short: On my hon. Friend's last point, I shall bear in mind what she says. I shall try to make such an arrangement as soon as possible. On my hon. Friend's first point, it is basic to this party's whole existence that we try to prevent unemployment. We bend all our

policies towards that end. However, the overriding consideration at present is to cure inflation. It is clear that inflation is now the biggest enemy of employment and the biggest cause of unemployment. I hope that we can count on the support of my hon. Friend in all our measures to try to reduce the rate of inflation. That is the surest and most certain way of preventing unemployment.

Mr. Adley: As the right hon. Gentleman has just said that preventing inflation and unemployment are the Government's prime targets, as they featured so large in the Gracious Speech, and as the now defunct social contract was advertised in that speech as the cure of all these problems, will the right hon. Gentleman not now agree that the Prime Minister, as the architect of that policy, was either responsible for perpetrating a deliberate fraud on the electorate at the last election or guilty of a stupefying level of political naivety? Which was it?

Mr. Short: The social contract is still very much alive—[Interruption.] Of course, many right hon. and hon. Members in the Conservative Party have been dead for years. The recently announced anti-inflation policy is a development and evolvement of the social contract. Over the coming months the Opposition and the country will see that the social policy is working.

Mr. Roy Hughes: In his original answer my right hon. Friend said that he was not satisfied with the situation. Since the Labour Party Manifesto contained a proposal to take the ports into public ownership, will he ensure that this is contained in the next Queen's Speech and is given the utmost legislative priority?

Mr. Short: I hope that my hon. Friend heard me correctly when I said that I was very satisfied with the progress we had made. Originally, I read the wrong answer. The manifesto on which he and I fought the election was for a five-year Parliament. So far we have had only 18 months of it.

Mr. Blaker: Has the right hon. Gentleman observed that one person who so far does not appear to have been overenthusiastic about helping the Government to pursue pay and prices policies is Mr. Scargill? Has that Mr. Scargill


any connection with the Mr. Scargill who, when trying to break the pay and prices policy of the Conservative Government, received the enthusiastic and wholehearted support of the Labour Party, including the Prime Minister?

Mr. Short: Fortunately, I have no responsibility for Mr. Scargill.

Mr. Heffer: Surely my right hon. Friend read the right answer—though not for the reasons which the Opposition are putting forward. Does he agree that we have retreated somewhat from our original proposals—based on pressure from the CBI, the City of London and the Tory Party? Will he give an assurance that there will be no further retreat, that we shall ignore completely the demands from the Opposition that we should withdraw our nationalisation and public ownership proposals, and that we shall carry them out as part of our campaign to combat unemployment?

Mr. Short: I entirely agree with the last part of my hon. Friend's supplementary question. What the Opposition are saying in this respect is utter nonsense. In reply to the first part of his question, I must tell the House that there has been no retreat. We have listened to what people have said on the progress of the Bill and have made amendments which we thought would command public support.

Mr. Renton: In view of the satisfactory original answer, may I inform the House that I do not wish to raise the matter on the Adjournment?

Mr. Speaker: No, the hon. Gentleman may not say that.

BUSINESS OF THE HOUSE

Mrs. Thatcher: Will the Leader of the House please state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): Yes, Sir. The business for next week will be as follows:
MONDAY 21ST JULY—Motion to approve the White Paper "The Attack on Inflation" (Command No. 6151). The Remuneration, Charges and Grants Bill will be relevant.
TUESDAY 22ND JULY—Supply [29th Allotted Day]: The Question will be put on all outstanding Votes.
Conclusion of the debate on Command No. 6151.
Motions on Members' pay and allowances.
WEDNESDAY 23RD JULY—Second Reading of the Remuneration, Charges and Grants Bill.
Consideration of Lords amendments to the Lotteries Bill.
Remaining stages of the Limitation Bill [Lords] and of the Public Service Vehicles (Arrest of Offenders) Bill [Lords].
Motion on the Rate Support Grant (Increase) Order 1975.
THURSDAY 24TH JULY—Remaining stages of the Remuneration, Charges and Grants Bill.
FRIDAY 25TH JULY—Consideration of EEC documents on common agricultural policy (R/635/75) and on fisheries policy (R/2713/73 and R/2193/74).
MONDAY 28TH JULY—Progress on the Report stage of the Community Land Bill.

Mrs. Thatcher: Since there will be many hon. Members who will wish to take part in the debate on the White Paper, may we have a suspension of the rule on Monday? Secondly, as the Prime Minister answers question on the White Paper by referring to a Bill containing reserve powers, may we have sight of that Bill before we come to debate the White Paper? Thirdly, is it necessary to take the remaining stages of the Remuneration, Charges and Grants Bill the day after the Second Reading? If so, shall we be able to table manuscript amendments on Report?

Mr. Short: In answer to the first part of the question, if it is the wish of the Conservative Party and of the House generally, I should be glad to arrange for a suspension of the rule on Monday. The Bill contains reserve powers and the White Paper refers to the Bill as drafted. We hope that it will not be necessary to introduce it, but if it is necessary it will be introduced—[HON. MEMBERS: "Oh."] I repeat what I have just said—namely, that if it be-


comes necessary, and I hope that it will not, the Bill will be introduced. In reply to the final point put to me by the right hon. Lady, the remaining stages are being taken on one day. I know that this is asking a great deal of the House, but I hope that this will be done in view of the importance and urgency of the measure.

Mrs. Thatcher: I am not asking the right hon. Gentleman to introduce the Bill but may we not see a draft of the Bill, which, of course, will be relevant to the debate?

Mr. Short: I do not think any useful purpose will be served by that course because the Bill is not part of the White Paper or of the anti-inflation plan. [HON. MEMBERS: "Yes it is."] There is no intention of putting the Bill through the House at present, and I hope that it will not happen.

Mr. Wellbeloved: Having found time for an important debate on the Boyle Committee's Report next week, could my right hon. Friend turn his attention to whether it would be possible for the Government to squeeze a little more time out of their parliamentary timetable to debate the Finer Report on one-parent families?

Mr. Short: Certainly I promise a debate in this Session, but I am afraid that it cannot be before the Summer Recess. There is no hope whatever of such a debate before we rise because of the additional time needed for the anti-inflationary measures. [An HON. MEMBER: "Shame."] We have been pushed into this situation because of requests for more time for other matters and we have given more time. I do not complain about the situation, but it has complicated the remaining few weeks before the Summer Recess.

Mr. Geoffrey Finsberg: Is the right hon. Gentleman aware that there is an ever-lengthening queue of Select Committee reports which physically cannot be printed? Will he please see whether he can make a statement next week, because in these modern times it surely should be possible to arrange the printing of a Select Committee report within seven days as most companies are able to manage?

Mr. Short: I know that this matter is causing some concern among hon. Members, and I shall look at the matter to see what can be done. If I feel that I can say anything useful to the House, I shall do so.

Mr. Thorpe: Surely the right hon. Gentleman realises that his right hon. Friend the Prime Minister is reserving the possibility of reserve powers being prepared by the Government. Since this represents a major departure, will he satisfy our curiosity by letting us see what those powers are? Is he aware that many of us feel those powers to he highly relevant to the view we shall take on the White Paper and to the Bill which we shall be asked to debate next week?
Secondly, on the basis that undertakings given in both Houses were genuine, may we know when a Select Committee in this House or a joint committee of both Houses will be set up to determine the apportionment of numbers between all parties and the method of selection of representatives of the parties in this House and in another place in the European Parliament, since many of us believe that the two-party "carve-up" is not the most effective system?

Mr. Short: I think the right hon. Member for Devon, North (Mr. Thorpe) and the right hon. Lady the Leader of the Opposition know what the Bill contains [HON. MEMBERS: "No."] This has been made absolutely clear. We hope that the Bill will never be necessary. But if it is necessary at any time, it will be published.
With regard to the right hon. Gentleman's second point, discussions will take place in the near future through the usual channels, and I hope that before long a Select Committee will be set up.

Mr. Mikardo: May I draw my right hon. Friend's attention to Early-Day Motion 551, which is widely supported in all parts of the House and which calls for the setting up of a Select Committee on Cyprus? Since this is a matter on which there may be controversy, will he find time to consider this matter before we rise?

[That a Select Committee be appointed to visit Cyprus on a fact-finding mission and for the purpose of examining what


steps the United Kingdom may reasonably take to comply with their responsibilities imposed under the Treaty of Guarantee (Command Paper 1253):

That the Select Committee shall consist of Ten Members:

That the Select Committee shall report upon their findings to this House and pay particular regard to the plight of British residents in Cyprus and any steps recommended to assist in this regard.]

Mr. Short: I know that my hon. Friend is concerned about this matter, and he and I discussed it recently. I shall discuss the matter with my right hon. Friend the Foreign Secretary on his return from Poland and see whether anything can be done before the recess.

Mr. Fletcher-Cooke: Since the Prime Minister has referred more than once to the draft Bill with back-up powers as being printed, is there not an obligation not merely of honesty but also of order in the House that when a State paper is referred to more than once it has to be tabled?

Mr. Short: It does not become a State paper until it is tabled.

Mr. English: Will the Leader of the House tell the House when the motion on Members' pay will be tabled, so that it is open for amendment?

Mr. Short: I am not sure, but I hope that it may be tabled tomorrow, or certainly by Monday at the latest. I hope that it will be tomorrow.

Mr. Biffen: Is the Leader of the House aware that the Remuneration, Charges and Grants Bill has clauses which separately involve the Treasury, the Scottish Office, the Department of the Environment and the Department of Employment? In these circumstances, is it not wholly unacceptable that the House should be expected to give it a Committee and Report stage in one day, particularly in the absence of any printing of the back-up Bill to which it refers? Will he, in those circumstances, therefore, consult his hon. Friend the Member for Liverpool, Walton (Mr. Heffer), and others, as this is a subject which cannot be neatly confined to the usual channels?

Mr. Short: It is usual—and there are many precedents—for Bills of this importance and urgency to pass all three stages in one day. But in this case we have this week, in deciding the business, agreed to a request from the Opposition for more time. We had intended to compress it into an even shorter time. We had looked at the precedents and were hoping to do that. However, the Opposition asked for more time and we readily agreed to more time. As I said, I do not complain about that at all.

Mr. James Lamond: Will my right hon. Friend remind the Prime Minister that his statement on 23rd May with regard to textiles referred to the urgency of this matter but that we are still awaiting the outcome of the talks which, according to that statement, were to be undertaken? Will he ask the Prime Minister whether he will ensure that a statement is made next week at the latest, as mills are still closing and the position, while not deteriorating, is certainly as bad as it was on 23rd May?

Mr. Short: I said last week that I hoped that the statement would be made this week. I regret very much indeed that it has not been made before today, but I will see that it is made within the next two or three days.

Mr. Alexander Fletcher: Has the Leader of the House seen Early Day Motion No. 588, which refers to the large salary increases, of up to £70 a week, awarded to senior local government officials, who have already received large increases during the past year? As the Secretary of State for Scotland has washed his hands of any responsibility for this large increase in public expenditure, will the Lord President arrange for a more responsible Minister to make a statement about it to the House next week?

[That this House calls upon the Government to ensure a fairer implementation of its counter-inflation policy following the recommended salary increases for senior local government officials in Scotland who have already received major increases within the past year due to upgrading as a consequence of local government reform, a negotiated national award and, in the Lothian Region, an additional £1,000 per annum to maintain differentials.]

Mr. Short: I understand that there were some replies on this yesterday, but I am told that the awards are within the guidelines, that they were agreed through the National Joint Council, and that they amount on average to 22 per cent., the same as in England. They became effective, I am told, on 1st July.

Mr. Roper: Will the Lord President agree that there will be dissatisfaction in all parts of the House that he has allocated the subject of the stock-taking document on the common agricultural policy for next Friday, which is not a particularly convenient time for Members with constituencies outside London or with agricultural interests? Will he consider whether a more convenient time for that document can be found?

Mr. Short: It is difficult at this time of the year, and I wanted to give rather more time than the normal 1½ hours late at night. The whole day on Friday is being devoted to these documents. I should have thought that that would be welcomed by those Members who are interested in the subject.

Mr. Peter Walker: As the White Paper specifically says that the draft back-up Bill has been prepared, and as the Leader of the Opposition and the Leader of the Liberal Party have both requested on behalf of this side of the House that we shall have a sight of it, why is it that the Leader of the House does not want us to have a sight of it?

Mr. Short: It is not that I do not want the House to have a sight of it. As I said, we hope that the Bill will never be necessary. It is a Government Bill which has not yet been introduced. We have been honest with the House and the country and told the country that this Bill has been prepared. I shall certainly convey to the Prime Minister what the right hon. Lady said and I shall pass on her request.

Mr. D. E. Thomas: Has the Leader of the House seen Early Day Motion No. 589 in the name of my hon. Friend the Member for Caernarvon (Mr. Wigley)? Will he ensure that there will be an opportunity to debate the Daniel Committee Report on the "Working of the Water Act 1973", if not on the Floor of the House then in a specifically convened

session of the Welsh Grand Committee, as soon as that report is published?

[That this House expresses its concern over the continued delay in the publication of the Daniel Committee Report on the Working of the Water Act 1973 in Wales; and calls on the Secretary of State for Wales to facilitate its publication without further procrastination.]

Mr. Short: I know how interested Welsh Members on both sides of the House are in this matter. I shall bear in mind what the lion Member said and see what I can do.

Mr. Dalyell: Will the Lord President reflect on his earlier decision and consult Treasury Ministers about the desirability of providing a proper financial appendix to his White Paper on devolution? Will he say whether officials responsible for the new regions—whose salary increases have raised a few eyebrows—are to be paid more or less than those responsible for the Assembly? Will he not agree that these are questions that have to be considered?

Mr. Short: The hon. Gentleman, I believe, has a Question down today on this or a related matter, but it is much too early yet to talk about salary structures or staff, the size of the staff or anything of that kind for the Scottish Assembly.

Mr. Rees-Davies: Further to the answer which the Leader of the House gave earlier about the setting up of the Select Committee on Cyprus, will the Leader of the House, before setting up the Select Committee, be prepared to have a meeting with those responsible for the all-party motion in regard to the right terms of reference to be given to such a Select Committee, bearing in mind the delicate situation in Cyprus and the importance of keeping this matter on an all-party basis in the best interests of the country?

Mr. Short: I am prepared to talk to any hon. Members on this matter. The essential point is to get a group together to go to Cyprus to investigate the position. I shall bear in mind what the hon. and learned Gentleman and my hon. Friend have said today.

Mr. Raphael Tuck: Will my right hon. Friend give the House some indication


when his right hon. Friend the Secretary of State for Industry will make a further statement on the HS146, as the longer this is delayed the more costly it will be when it is taken up and the less chance there will be of getting the fine design team together again?

Mr. Short: I shall pass on to my right hon. Friend what my hon. Friend has said. Perhaps he will contact my hon. Friend.

Mr. Cyril Smith: Since the Lord President has stated that hon. Members on this side of the House know what is in the unpublished Bill, which he refuses to publish, will he take it from me that at least some of us do not know what is in the Bill? Will he explain to me how he presumes that we know what is in an unpublished Bill? Is it the Governments intention to leak it to the Press as they did in the case of Member's pay?

Mr. Short: I completely refute the hon. Gentleman's last few words. I explained yesterday that there was clear evidence of a leak on the question of Members' pay and we are investigating it. The details of Members' pay were certainly not given to the Press by the Government.
Concerning the hon. Member's first question, I said a minute ago that I shall pass on the right hon. Lady's request to the Prime Minister on this matter. If the hon. Gentleman will read the statement on inflation, he will see that the contents of this Bill were explained.

Mrs. Wise: Will my right hon. Friend bear in mind that acceptance of the White Paper seems to imply acceptance also of this unpublished Bill and that many of us on the Government side of the House are completely dissatisfied with the suggestion that we should accept something unseen? Will the right hon. Gentleman therefore mention our request when he speaks to his right hon. Friend the Prime Minister, and will he also mention that it may be that we shall be called back during the recess and that it will be completely unsatisfactory for us to rush back to consider hastily or pass a Bill which we have not seen, when apparently the Bill is already in draft and could be placed before the House?

Mr. Short: Neither the Prime Minister nor I have any doubts whatever about my hon. Friend's views.

Mr. Peyton: May I go back to the point about the unpublished Bill? While the whole House is grateful to the Lord President for the move he made just now in saying that he would consult his right hon. Friend the Prime Minister, what is very important is that he should make a statement to the House, perhaps tomorrow, so that the House knows where it stands in advance of the very important debate on which it is to embark on Monday. Will not the right hon. Gentleman realise that there is a very strong demand on both sides of the House for this to be done and that we find it very difficult to accept his rather novel doctrine that until a document is tabled it is not a State document?
Concerning the very important Remuneration Charges and Grants Bill, will not the right hon. Gentleman realise that this is a measure which introduces some very novel and rather dangerous themes, and that it would be as well if the public, as well as Members of Parliament, had good time in which to digest what is in the measure and to react to it before it has passed all its stages? Will the right hon. Gentleman accept that, although the Government have made a move in our direction, they would not be unduly generous if they were at this stage to withdraw one of the time-consuming and highly controversial measures which they are pushing through an already congested Parliament?

Mr. Short: On the first point, I have said, as the right hon. Gentleman acknowledged, that I shall pass on this request to the Prime Minister. I cannot give any undertaking to make a statement about it tomorrow.
I shall bear in mind what the right hon. Gentleman said on the second matter.

Later—

Mr. Kershaw: On a point of order, Mr. Speaker. May we have your ruling on a matter arising from the unpublished Bill which we have just been discussing? When a document of that importance and substance is referred to not merely in passing but as a matter of argument, is it not customary for it to be laid before the House?

Mr. Speaker: I think that the rule is that the document has to be quoted from before it has to be laid. But I shall consider the matter and, if I wish to depart from that preliminary view, I shall let the hon. Gentleman know.

QUESTION OF PRIVILEGE

Mr. Speaker: I now have to rule on the matter of privilege raised yesterday by the hon. Member for Chingford (Mr. Tebbit). While not expressing any general opinion as to leakages of information and the rules of privilege, I do not think in this case that the matter is such as would justify me in giving precedence over the Orders of the Day to a motion concerning it.

REGIONAL AFFAIRS

Ordered,
That the matter of unemployment in the East Midlands be referred to the Standing Committee on Regional Affairs.—[Mr. John Ellis.]

UNITED STATES OF AMERICA (BICENTENARY)

3.52 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): I beg to move.
That an humble Address be presented to Her Majesty, praying that Her Majesty will give directions that, to mark the Bicentennial celebrations of the United States of America there be made, on behalf of Parliament to the Congress of the United States, as representative of the American people, a loan for one year of one of the two original copies of Magna Carta dated A.D. 1215 and held by the British Library; that a permanent showcase be presented to the Congress for the display of the document, and that the document be replaced at the end of the loan period by a replica; that the presentation be made by representatives from both Houses of Parliament; and assuring Her Majesty that this House will make good the expenses attending the same.
If the House accepts this motion, as I am sure it will wish to do, arrangements will be made for a delegation from both Houses to make the presentation and for an appropriate ceremony here to mark the occasion. We hope that this can be arranged early next summer. Preliminary discussions have been taking place through the usual channels as to what form the ceremony might take.
We believe that the appropriate way to celebrate this would be to make available one of the copies of Magna Carta at present in the British Library to be on loan for one year to America, that a permanent show case should be presented to Congress for display of the document, and that the document should be replaced at the end of the loan period by a replica.
Because of the value of Magna Carta, special arrangements will need to be made for its transport and security.
In 1972, in response to an invitation from the former President of the United States for Britain to participate in the American bicentennial celebrations, the then Secretary of State for Foreign Affairs set up a committee under the chairmanship of the Marquess of Lothian to recommend what form Britain's contribution should take. In addition to this loan of Magna Carta, the committee has proposed that Her Majesty's Government should make a gift of a bell to the American people to be hung in Philadelphia, and to support a number of


artistic events in the United States. The committee has also proposed that, together with the Government of the the United States, we should institute a joint programme of fellowship in the creative and performed arts. I am sure the House will agree that these proposals both illustrate the common heritage of this country and the United States and also look to our future friendly relationship.
I therefore commend the motion to the House in the expectation that it will he accepted as an expression of our friendship and good will to the Congress and the people of the United States of America on the occasion of their bicentenary.

Mr. Reginald Maudling: On behalf of my right hon. and hon. Friends, may I associate myself very warmly with the motion, of which we heartily approve?
It is right that the House should mark the occasion, and I think that the methods chosen are extremely appropriate, with their relevance to our common heritage, democracy and democratic government. The relationship between Britain and America has always been a special one—possibly the relationship between an older brother and a younger one. There has always been a kinship. We are delighted that it should be marked in this way by the House.

Mr. Jeremy Thorpe: It is a privilege to be associated with the motion. It comes as a continuing surprise that it is now 200 years since the United States decided to go it alone. It is for historians to decide which country has derived the greater benefit. But I think that the arrangement has been to the considerable advantage of both countries and certainly has not weakened the friendship between our peoples.
I have to declare a personal interest. Having at the age of 11 been thought too young to fight in the war and my father having been on the German blacklist and warned that the entire family would be exterminated, it was thought that the younger members should go to America, and that is where I started my education during the war. For that reason, I have a particularly warm feeling towards the

American people. I returned at the due age of qualification to this country.
Although our political and legal systems have evolved in different ways, basically the same democratic principles persist, and Magna Carta, which itself was a challenge to those who sought to subvert the national will, is one of the principles that we still hold today and which the United States does as well. Therefore, it seems that this represents the shared spirit of democracy between the two nations. I hope that the American people will interpret it as further evidence of the friendship between our nations.
I hope, too, that this motion will be carried with great enthusiasm and will be seen as such in the United States.

Mr. E. Fernyhough: Although I readily endorse all that has been said, I wonder whether my right hon. Friend can make certain that, when these celebrations are undertaken, some recognition can he given to the Part which Thomas Paine played in drawing up an American Constitution at a time when it was not very well respected here. It is necessary to remember the struggles of men against the establishment here, because they made a great contribution towards what is called the American freedom of today.

Mr. Roger Moate: As you will know, Mr. Speaker, in your capacity as President of the British-American Parliamentary Group jointly with the Lord Chancellor, some 550 hon. Members of this House and of another place subscribe to the British-American group, which has as its aim the fostering of the closest possible relationships between our Parliament and Congress.
As honorary secretary of the group, I am sure that all its members will commend the motion as a fitting contribution to the celebration of the bicentenary of the Declaration of Independence, and I am sure that no hon. Member who has been received in Congress or who has welcomed congressmen or senators here can be unaware of the immense bonds of friendship existing between our nations and legislature.
I feel sure that the initial loan of Magna Carta and its subsequent replacement by a replica is a most fitting and appropriate contribution and demonstrates


what very close links of heritage and friendship there are between our nations.
I thank the Lord President for the courtesy with which he has received suggestions with regard to this matter. I hope that it will be possible to arrange a suitable joint parliamentary-congressional occasion for the presentation of Magna Carta and that such an occasion will be convenient to both this House and to Congress.

Mr. Douglas Crawford: In view of the fact that many Scots were associated with the establishment of the United States, I should like to join with the other parties in the House in commending the Lord President's proposal. However, I wonder if I could plant in the right hon. Gentleman's mind the suggestion that along with Magna Carta we should, perhaps, also send the 1320 Declaration of Independence signed at Arbroath.

Mr. Michael Hamilton: I welcome the motion. However, such documents do not travel easily and do not welcome change of atmosphere.
I should like to ask the Leader of the House whether it is correct that there were only two original documents? I rather think that there were four.

Mr. John Stokes: While I am in no way opposed to the motion, I hope that hon. Members will not forget those Americans who during the rebellion were still loyal to the crown of England.

Mr. Michael Marshall: As one who has had the advantage of receiving his higher education in the United States, I should like to be associated with the terms of the motion. I briefly point out to the Leader of the House that there are a number of other associated organisations within the House that are also taking a keen interest in this matter. In particular, the right hon. Gentleman will be aware of the work which his right hon. Friend the Member for Kettering (Sir G. de Freitas) and I are doing in co-ordinating the interests of those who received higher education in the United States. Can the right hon. Gentleman assure the House that he will consider some form of co-ordination not only with

that particular organisation but with all the many other bodies working along the same lines?

Mr. Andrew Faulds: I should like to make one or two observations on this matter. I think it is an admirable idea that we should lend Magna Carta for a year. However, I have great reservations about the presentation of replicas of original documents, because in a way they lessen the value of the originals. I am not sure that the matter can be reconsidered, but I think that the loan of the original document for a year has great significance and that a rather tatty replica lessens the gift.
As I understand it a bell is to be presented for display in Philadelphia. If that is true, it might be considered by the Americans as a little tactless. They might think that we are suggesting that they should have repaired the original. Certainly from my discussions in America over the past year or two about the bicentennial celebrations there has been the reiterated request that a Henry Moore statue of some sort should be considered as one of the British gifts. I should have thought that something of that nature was rather more suitable than a modern bell.

Mr. Carol Mather: I support the motion of the Leader of the House and the continuing link between our two countries. Can the right hon. Gentleman say wheher the copy of Magna Carta which is to go to the United States will be a properly amended copy, and, if that is not so, whether the amendments will be shown?

Mr. Raphael Tuck: As a former university professor in the United States, of which country I have the happiest memories, may I wholeheartedly associate myself with the motion proposed by the Lord President?

Question put and agreed to.

Resolved,
That an humble Address be presented to Her Majesty, praying that Her Majesty will give directions that, to mark the Bicentennial celebrations of the United States of America, there be made, on behalf of Parliament to the Congress of the United States, as representative of the American people, a loan for one year of one of the two original copies of Magna Carta dated 1215 A.D. and held by the British Library; that a permanent showcase be presented to the Congress for the display of the


document, and that the document be replaced at the end of the loan period by a replica; that the presentation be made by representatives from both Houses of Parliament; and assuring Her Majesty that this House will make good the expenses attending the same.

To be presented by Privy Councillors or Members of Her Majesty's Household.

Orders of the Day — FINANCE (No. 2) BILL

As amended (in the Committee and in the Standing Committee), further considered.

Clause 17

VAT: HIGHER RATE

4.4 p.m.

Sir Geoffrey Howe: I beg to move Amendment No. 112, in page 13, line 17, leave out subsection (2).
Before considering the amendment, I wonder if I might raise with you, Mr. Deputy Speaker, one point of order about the grouping of certain later amendments on the Notice Paper. You will see that there are three separate groups, the first beginning with Amendment No. 36 and including Amendments Nos. 35 and 39; the second beginning with Amendment No. 41 and including Amendment No. 42; and the third comprises Amendment No. 43 alone. All those amendments are concerned, broadly speaking, with navigational and aviational matters—in other words, boats and aircraft. It would appear to be convenient, certainly to my hon. Friends on the Opposition side of the House, if those three groups could be taken together; namely, the groups beginning with Amendment No. 36, Amendment No. 41 and Amendment No. 43. That proposal appears to be acceptable to the Minister.

Mr. Deputy Speaker (Mr. Oscar Murton): I understand that the Chief Secretary has indicated his assent, so that will be in order.

Sir G. Howe: The amendment is concerned with the proposed removal of subsection (2) of Clause 17 as it now appears before the House. We had some discussion on this subsection yesterday. We have already drawn attention to the way in which the Government propose to make use of this subsection, and I pause briefly to repeat that point.
It is of some concern that the concessions that the Government propose to make about the scope of Schedule 7—the breadth of the impact of the higher rate of VAT—are to be made not by debate before the House but by use of


statutory instruments laid under this subsection.
We are concerned in principle that this subsection removes from the House the power to decide exactly what changes should be made by the Government in the light of representations made by my hon. Friends in Committee about the nonsenses which the Government committed when they originally designed the scope of the higher rate of VAT. We do not welcome the way in which use is to be made of this subsection. Moreover, and more fundamentally, this subsection gives power to the executive, subject to mere negative resolution procedure in this House, to tax at the higher rate of 25 per cent. VAT, apparently without limit, a wide range of goods and services which are not at present subject to that higher rate. The House should certainly pause to consider how far it is prepared to entrust to any executive, but, above all, to this executive, the power to impose a higher rate of VAT on a limitless range of goods and services merely by laying a statutory instrument before the House.
The House should consider how far it is prepared to accept the principle of conferring a taxing power upon the executive, subject only to negative review by Parliament. One wonders how easily that proposal sits in the consciences, minds and hearts of Ministers—if at all —alongside the protests which some of them at least made about the transfer of the power to impose taxes to the European Community.
Moreover, we should argue that the power to add to the range of goods subject to the higher rate of VAT is in itself questionable, because it gives the Government power to extend the range of a tax which we have from the outset criticised as bad in principle. My right hon. and hon. Friends and I have from the start criticised the motivation behind the introduction of the higher rate of VAT. We have criticised it as representing a kind of latter-day version of Marxist materialism, profoundly misguided, and that has led the Government, as so often Socialist Governments tend to be led, to search for a range of goods which can be identified as luxurious and for a range of services which can be described as non-

essential upon which they can impose a higher rate of tax.
Throughout the proceedings in Committee hon. Members on both sides pressed the Government to acknowledge the unattractive, indeed lunatic, position which they have been obliged to take up in seeking to establish this higher rate of value added tax. They have been obliged as a result of the force of the arguments advanced by right hon. and hon. Friends, to make some concessions. They are to make concessions by statutory instrument hereafter to relieve of the higher rate of tax at least those purchases which are necessary for the salvation of human life and safety at sea and in the air, but apparently no further than that. The nonsense of which we have complained since the proposals were first disclosed apparently remain to take their place on the statute book.
From the beginning we have said that it would have been better for the Government, if they wished to raise additional revenue—with their extravagant spending habits, nobody can question the need for that—to raise that additional revenue by either restoring the 10 per cent. flat rate of value added tax or, indeed, never departing from it in the first place.
The introduction of these two rates of broadly applicable value added tax makes life far less tolerable than it is already for the trader, the retailer and the entrepreneur and tends to diminish, as we have pointed out many times, the respect which the citizen on either side of the counter has for the workability and good sense of the tax system.
We have no doubt—I take this opportunity of repeating the point—that the Government's decision to move towards a multi-rate value added tax has in practice, in the months during which it has applied, been as unwelcome and disastrous as we always warned that it would be.
The substantive points of complaint have been argued many times in Committee, and most of them remain upon the Notice Paper for consideration by the House today. We regard them as very important.
The Government, by their commitment to introduce a multi-rate value added tax, are doing grave damage in a number of directions. For example, they are doing


grave damage to a wide range of consumers by imposing a tax upon the servicing and repair of ordinary domestic equipment. They are doing wanton, pointless damage. They are destroying the credibility and reliability of the tax system and causing more citizens to cry out: "Why have the Government departed from the simple path of sanity?"
The Government are doing grave damage to consumers—in particular, to those living on retirement pensions and other small fixed incomes—by their proposal not merely to introduce a higher rate of value added tax on television rentals, but to do so in relation to preexisting contracts. Many hon. Members on both sides of the House have been roused to anger by this proposal. It is astonishing that there is only one ordinary Member on the Government benches when this matter comes up for discussion, because, as I said earlier, many hon. Members on both sides of the House have complained, with good cause, about the decision to increase VAT on television rentals, including pre-existing contracts.
The proposal to extend the higher rate of VAT to shipbuilding, yachting, certain classes of aviation and caravans is a characteristic misapplication of the fiddling predisposition of a Socialist Government. The small boats part of the shipbuilding industry has already been facing grave difficulties. Many of my hon. Friends have written to me, and I am sure, to the Chancellor, drawing attention to the impact of this proposal on the industry and their constituencies. This higher rate of VAT is unnecessary and has not been justified.
Likewise, the impact of the higher rate of VAT on many millions of citizens throughout the country who engage in sporting activities, boating, sailing and flying is unnecessary. In all these areas we shall continue to criticise what the Government have done.
4.15 p.m.
The Government have committed themselves to a wrong-headed change which will lead, as it has already, to mounting problems for those engaged in these trades and industries. It will lead, and has led, to growing disrespect for the law and to a rapid and extensive multiplication of anomalies.
It is for that reason that I renew the commitment that I have already given on behalf of my right hon. and hon. Friends that, as fast as possible, we shall restore the original simplicity of a single standard rate of value added tax. There can be no justification for the alternative to which the Government have committed themselves.
I question the Government about the way in which this subsection, which gives taxing powers to the executive, is to be, and has been, used. It is gravely disturbing in principle and particularly disturbing because of the extent to which the Government are relying on it as a means of bypassing parliamentary consideration of the changes which we have urged on them in our many debates on this subject.

Mr. Patrick Cormack: I do not propose to detain the House long, but I should like to endorse everything that was said by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). We have here a graphic illustration of the absurdity and anomalies created by a multi-rate value added tax system. There cannot be a Member in this House who does not in his heart share the feelings of constituents who have written about the effect of this proposal on electrical repairs, television rentals and the difficulties of those who innocently enjoy their leisure in boating and other sporting activities.
The matter to which I should like to refer at greater length is slightly more esoteric, but important.
My hon. Friend the Member for Norfolk, South (Mr. MacGregor), in a brilliant speech in Committee, referred to the anomalies created in the antique trade by the discrimination against certain objects over 100 years old.
Briefly, the facts are that when VAT was brought in—I should be grateful for the Minister's attention, because this is important for some people—after pressure from both sides of the House—the Minister of State took part in some of the negotiations—a special scheme was devised to preserve and protect the British art market. Under that special scheme, VAT was levied merely on the margin between the cost and selling prices of articles. That special scheme still remains, but, as a result of the Govern-


ment's mucking about with VAT and the introduction of this multi-rate, we have the absurd situation that one sector of the art and antique market—that dealing with silver, jade and other precious objects—is unfairly discriminated against.
I said that this was a slightly esoteric subject, but it is of real importance to Britain's position as the centre of the art market. After the Minister of State's particularly sympathetic reception of the powerfully advanced arguments in Committee, I had hopes, as had many others, that the Government would think again.
It was significant that this was the only amendments which was supported by hon. Members on both sides of the Committee. Even today, although it has not been called—indeed, it would be improper for me to refer to it at length—a similar amendment appears on the Notice Paper signed not only by myself and my hon. Friends but by the two senior Members on the Government benches. It is extremely unfortunate that the non-partisan powerful arguments advanced in Committee have not been heeded by the Government.
I believe that the Government are in danger of doing great damage to an important part of the British art market. They are in danger of creating chaos and confusion where previously uniformity and an understandable situation applied. I would urge the Government even at this late hour to think again on this.
In conclusion, I would reiterate the wise remarks of my right hon. and learned Friend in opening this debate, that tinkering with the machinery of VAT, which was originally, from the public's point of view, a simple and understandable tax, is one of the most ridiculous things the Government have done. The most ridiculous aspect of this ridiculous act is that they would have had much more revenue—and, heaven knows, we need revenue—if they had reintroduced the flat 10 per cent. rate. Nobody would quibble with their decision to increase VAT in these parlous times, but reintroduction of the 10 per cent. rate would have been so much more sensible. Let us hope that when we get Finance Bill (No. 3) in the autumn of this year, as undoubtedly we shall, the Government will at long last see sense.

Mr. John Pardoe: Like the right hon. and learned Member for Surrey, East (Sir G. Howe), I have consistently opposed a higher rate of VAT and feel that that is still a sensible position to take. I do not oppose a higher rate of VAT or multi-rate VAT on grounds of absolute dogma. If one could be persuaded that the efficiency of the tax required that we should have one more rate I believe that most of us on this side of the House would go along with it. If we were persuaded that there was an essential revenue requirement and that revenue could be raised only in this way. I am sure we would go along with that.
There are, however, no reasons for this change that the Government have made. It is an exceedingly bad revenue raiser because they are to get in total income, as additional revenue from this change to the higher rate, approximately a 1 per cent. increase across the board of VAT. Had the Government raised the rate from 8 per cent. to 9 per cent. they would have got in as much by doing so as by the 25 per cent. rate. Considering the distortions that are inevitably caused by a higher rate of VAT as between one industry and another, if the Government could prove that this tax was efficient it might be justified, but in this case they cannot. I would favour, therefore, an alternative increase right across the board. I would actually have favoured 10 per cent. had the Government not reduced the rate from 10 to 8 per cent.
I am much more concerned in this amendment with the stability of the tax system, which has not so far been argued as the main reason for this amendment. This change which the Government are seeking power to make may well be a very small step in terms of the Government's total revenue but it can be a very considerable step in terms of the economic planning within one particular industry. If at the drop of a hat, as this subsection allows, the Government decide that one industry's products shall suddenly be moved from the 8 per cent. rate to 25 per cent., the total amount of extra revenue for the Exchequer probably will be peanuts, but in terms of the distortions it will cause within that industry it may have massive effects. Therefore, I believe we should take our stand here in this Parliament and say that we are not going to accept a measure which makes it too


darned easy to change a tax of this kind which can have these very substantial economic effects on a particular industry.

Mr. John Horam: Does the Liberal Party believe in arguments in terms of social justice in favour of having differential rates of tax in principle? I accept the hon. Gentleman's argument on the effect on one particular industry, but does he not concede the general case that there is an argument in terms of the redistributive effects between necessities and essentials on the one hand and luxuries on the other? That is the classic argument in favour of having two rates of tax.

Mr. Pardoe: I might be perfectly prepared to debate whether there is or there is not if we had not had to suffer page upon page of argument from the Government Benches that this is not a luxury tax. If it were a luxury tax we could debate it as such, but I will answer the hon. Gentleman's point. I can concede that there could be arguments in favour of taxing certain goods more or less than others, because we may have made value judgments about the desirability of poor people or rich people buying goods, or about their ability to buy them, or whatever.
Frankly, I might prefer to make the argument in terms of the environmental consequences of the use of products but I believe that the disadvantages of trying to make value political judgments of that kind are greater than the advantages we gain—the disadvantages of distorting the market and trying to set the Government or Parliament up as some kind of almighty god to judge what people should wear and buy and do with their money. The best thing we can do with people's money is to let them choose how to spend it; and the more hon. Gentlemen opposite allow the people of this country to make that fundamental choice themselves, the better this country will survive in the economic future.

Mr. Cecil Parkinson: I am always interested in listening to the Liberal Party saying that Parliament should not be the judge of what people should wear and buy and do with their money, but the Liberal Party believes firmly that Parliament should be judge of what people should be paid and what people should earn and that Parliament

should make a value judgment about what people are worth to the community. We have been listening to a typical piece of Liberal humbug. Time after time we get this kind of outburst from the hon. Member for Cornwall, North (Mr. Pardoe), and half his speeches directly contradict the other half.
On this occasion the hon. Gentleman was on to a good point, but he made it in his normal, double-thinking, bad way. I would tell the Financial Secretary that I firmly believe the Government have once again complicated unnecessarily the tax structure by going for a 25 per cent. rate. I heard the hon. Gentleman make many arguments against the VAT, and we all know that the object of introducing this is as a broad-based tax on expenditure which does not attempt to impose value judgments on different types of expenditure. Those were the arguments made by the Government of the day.
I happen to believe that the 10 per cent. and zero rating produced good revenue and produced as few complications as it was possible to have—and there are bound to be some in any expenditure tax. The Financial Secretary in Committee pointed to some of the anomalies which existed, on children's footwear and so on, but forgot to mention that most of these anomalies arose out of concessions urged on the Government by his own party during the course of the debate on VAT. It was the hon. Gentleman and his hon. Friends in those days who were urging the Government to create the exemptions which produced a number of the anomalies. I thought it was a little bit rich of him at that time to point to the anomalies for quite a few of which he was claiming the credit of having secured when he was sitting on the other side of the House.
In Committee we saw some of the silly consequences of the introduction of the 25 per cent. rate. I think particularly of the caravan group in Schedule 7, where caravans have been elevated to the role of non-essentials. People who go for a holiday in a caravan they own have paid 25 per cent. tax on it but people who go to luxury hotels, abroad or at home, or take holidays in all kinds of other, no more essential, ways are regarded as being responsible for paying VAT at the rate of 8 per cent.
The 25 per cent. rate does not produce much income. It produces a mass of complications, and the Government should have gone back to the 10 per cent. basic rate. By doing so they would have had more revenue available and would have avoided many problems. There is no real defence of the 25 per cent. rate except that of which we have heard, stock appreciation relief. The Chancellor made a "boob". He cut the rate to 8 per cent. for purely political reasons and then could not bring himself to reverse a bad decision; so we have this mass of totally unnecessary complications.
Amendment No. 112 is very sensible, and, therefore, I am certain that the Government will not accept it.

4.30 p.m.

Mr. Nicholas Ridley: On a point of order, Mr. Deputy Speaker. Subsection (2) says:
The Treasury may by order vary Schedule 7 to this Act by adding to or deleting from it".
It seems to me that that is out of order. I cannot see how you allowed the Bill to be printed in this form, Mr. Deputy Speaker. It is wrong for back benchers to seek to amend a Finance Bill by adding to the taxation imposed upon the citizens. If, for instance, the words "by adding to" had been left out of the Bill and I had put down an amendment seeking to include them, you would rightly have ruled it out of order, because it would have widened the scope of the increased VAT rate band, thereby increasing taxation, and it is out of order to do things of that sort.
It seems to me that the conclusion from that is that it is out of order for the Treasury to seek to increase taxation by the order referred to in the subsection. I know of no parallel instance where taxation can be increased by order. I think that the House would thoroughly dislike the concept of increasing taxation by order. If it were decided to add to the increased rate band at any stage, a further Finance Bill should be introduced, so that the matter could be debated with the full procedures given to a Bill, and not simply dealt with by an order.
Therefore, Mr. Deputy Speaker, would you accept a manuscript amendment from me to remove the words "by adding to", whatever may be the result of the debate

and vote on this amendment, on the ground that these words are out of order?

Mr. Deputy Speaker: The effect of the Bill when it becomes an Act is a matter for the courts; and it would be wrong, and out of my capacity, to accept such an amendment.

Mr. Ridley: But if I had moved an amendment in the spirit of those words, Mr. Deputy Speaker, you would have ruled it out of order. I do not think that you would quarrel with that proposition, and I would not have quarrelled with your action if you had done so.
Therefore, I cannot see how the Government can put something in their Bill which is out of order, something which you would regard as out of order if I tried to include it in the Bill. It seems to me a question of "heads they win and tails we lose", and, with the greatest respect, I should like to take the matter further.

Mr. Deputy Speaker: I am advised that there is frequently such a situation in financial matters.

Mr. Horam: I am interested in the Opposition's arguments on this matter. They now appear to be arguing that the provision is out of order, when previously they had argued that it was impractical in the immediate situation, and wrong in principle to have a higher VAT rate in addition to the standard rate. Whether they are Conservative or Liberal, they should make up their minds precisely which argument they wish to use. The object of my brief intervention in the speech of the hon. Member for Cornwall, North (Mr. Pardoe)—[Interruption.] I agree, and I was interested in the hon. Gentleman's remarks, which bore out my suggestion that there was a difference in the Opposition's argument on this matter.
If the Opposition argue that it is wrong in principle to have a number of different VAT rates, I think that they are completely wrong. There is a classic and well-argued case in favour of having different rates. The Opposition say that there is a value judgment in having more than one rate. There is equally a value judgment in having just one rate, because one then accepts the existing value judgment of the economic system in deciding the price of goods at particular times. Therefore, it is fallacious humbug to argue that we are imposing our Socialist values and that the Conservatives are


not imposing their Conservative values in having a single rate. I am glad to see that the hon. Member for Cornwall, North agrees.
This is a most important point, which seems to be missed in these debates. We argue about the effect on a particular industry. Occasionally we stray into matters of principle. Many of us on the Government Benches are in favour of having differential rates on particular items because we believe that we must inject our value judgments, just as the Opposition believe that they must inject theirs, into the system. We think that we thereby achieve a better degree of social justice than exists today.

Mr. John MacGregor: I was always one of those who favoured a single-rate VAT, not for value-judgment reasons but for a number of other reasons. The longer our debates on Schedule 7 continued in Standing Committee, the more I became convinced that it was wrong to introduce the two-tier rates, particularly when the increase was so big, from 8 per cent. to 25 per cent., and that the Opposition pledge to return to a single rate was wise.

Mr. Horam: Would there be any point in having a narrow differential, such as a difference of 5 per cent.? The whole object of the exercise is to have a big difference, as for other items. I think of the car tax, for example.

Mr. MacGregor: That is another argument for having a single-rate VAT—the consequences of having such a big jump, from 8 per cent. to 25 per cent. In Standing Committee the Government began with the view that they were following a principle and making value judgments between one type of product and another, but the longer our debates continued the more that sort of reply diminished as it became clear that we were not talking about essentials or even non-luxuries. We were not discussing views about particular products.
My first reason for being opposed to a jump from 8 per cent. to 25 per cent. is the effect on employment. As my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said, it is already clear that the jump to 25 per cent. has had a distorting effect on employment in particular firms and industries producing certain products.
It became clear as our debates continued in Standing Committee that the firms involved were in rural areas or small communities, where unemployment had been accelerated by the 25 per cent. rate of VAT, and was having devastating effects. Admittedly, it was not caused by that rate, because there had already been a down-turn in the economy. I have some such areas in my county.
I make no apology for mentioning again a television company which has closed down two factories in two separate small villages, with a serious effect on employment there. It is still threatening to lay off 25 per cent. of its work force in my constituency. Representatives of the workers saw me in the House last week to make a last plea that the Government should think again. They can see no other form of employment in the villages in which they live.
Similar effects are seen in industries manufacturing caravans and many other products which are now subject to the 25 per cent. rate. Therefore, the employment effect must concern us first.
It is not only the manufacturers that are affected. Retailers are worried about the effect on their turnover of the increase to 25 per cent. on a certain range of goods. We are to discuss on a later amendment the television rental position. The television industry, particularly at the retail end, is badly affected by the increase to 25 per cent.
The second argument is the effect on the retailer from the administrative point of view. VAT was opposed by retailers, and still is strongly opposed, because of the extra administrative burdens it places upon them. The two different levels of VAT make that administrative burden a great deal heavier. It will not be easy sometimes for the retailer to decide exactly which rate of VAT he should apply. It is difficult for him to make clear to his customer the logic of the distinction between many of the products that he sells.
The Government heeded the view of the retail chemists, who organised a strong lobby, and as a result something was done to diminish the impact on the retailer. If the Government had included a whole range of other products in the higher rate there would have been an administrative nightmare for many


retailers. Nevertheless, many retail sectors will have an administrative problem as a result of Schedule 7.
The next problem relates to difficulties that arise from having a dividing line, which is always the case with two rates. In Committee many examples were given of the distinction between goods that could be used for agricultural or gardening purposes and the rate that will apply to them. It will be difficult for retailers to explain the position.
My hon. Friend the Member for Staffordshire, South-West (Mr. Cormack) mentioned antiques. A glaring example is the work of art of a hundred years old or more which is made of glass and has one small piece of silver attached to it. That product would take a 25 per cent. rate of VAT, but another piece of similar glass without any silver would take an 8 per cent. rate. We debated this matter in Committee, and we advanced many arguments, as the Minister knows, for excluding those items from the 25 per cent. rate of VAT which have the special scheme for antiques applied to them and which are, therefore, works of art over a hundred years old. The hon. Gentleman will recall that he did not reply to the arguments about cascade effects and the antique trade having no final consumer because the products are sold again and again. My hon. Friend the Member for Staffordshire, South-West said that London was the centre of the international art market, and he mentioned the loss of outstanding works of art to overseas buyers who will not have to pay 25 per cent. VAT. He said that, therefore, there was an incentive to the dealer to sell these works of art overseas.
The Financial Secretary kindly received a deputation on this point and listened sympathetically to the arguments advanced. It is because we cannot debate this matter today that we are in the position of the Financial Secretary having made no reply on the record to all these powerful arguments.
In Committee the Financial Secretary understandably, took refuge behind the fact that discussions were taking place. However, as I understand the position from his announcement yesterday, only a small group of products will have, by order, exclusion from the schedule, and works of art over one hundred years old

are not included. I hope that the Financial Secretary will take this opportunity to give me his reasons for not accepting these arguments about works of art over a hundred years old in order that the trade and many hon. Members who feel strongly about this point understand the situation.
I turn to the effect on the consumer. The point has been made time and again that the groups mentioned in Schedule 7 often affect people such as pensioners, who will feel the increases severely. For example, there is the increase in television rentals and the 25 per cent. rate on radios. In the range of products that have been picked out no value judgment has been made as to luxuries or to the ranges of consumer who can afford to pay the extra 25 per cent. Throughout there have been cases where the poorer sections of the community have been discriminated against just as much as the better-off.
We shall deal with some of the more powerful arguments about safety and maintenance when we discuss a later amendment. One of the points that worry me in relation to Schedule 7 is that, with the high rate of tax on direct income and with this range of goods to which a 25 per cent. rate of VAT will apply, we shall reach the situation in which more and more of our citizens will regard it as legitimate and fair to find ways round the taxes. I do not condone that attitude—I greatly regret it. However, as well as being Members of Parliament we are ordinary members of the public, and I am sure that many hon. Members have heard of many instances in the past two or three months of people trying to find ways round the 25 per cent. rate. One of the sad things about the VAT system —of which I do not complain but it is there—is that there is, not only for the retailer but often for the consumer, an incentive to find ways round the high rate. I regret to say that with higher and higher rates of tax, such as we are experiencing now, this will become more customary, and it is a sad development.
I hope that the debates we have had in Committee and this brief debate this afternoon will cause Ministers never to introduce these types of swingeing increases again. I believe that there are many Labour Members who are as deeply worried as we are about some of the


implications of the 25 per cent. rate and would have preferred a straightforward increase from 8 per cent. to 10 per cent. I hope that Ministers will learn from our experiences, and that this will not happen again. For that reason, I support the amendment, because it will at least stop any addition between now and the next Finance Bill to the range of 25 per cent.

4.45 p.m.

Mr. Jerry Wiggin: Since the inception of VAT there have always been two rates because there has been a zero rate as well as a standard rate. The Government have argued that there should be a third rate, which was not just a step up but more than three times the standard rate and would have a totally disproportionate effect on a handful of industries.
In the debates we have had on Second Reading, in Committee on the Floor of the House and in Committee upstairs no Government spokesman has ever given a proper justification of the Government's philosophy behind the swingeing imposition of a 25 per cent. rate on certain selected items.
The hon. Member for Gateshead, West (Mr. Horam) said that the Government had made a value judgment—I believe I have quoted him correctly—on selecting certain items for the imposition of this tax. It is a value judgment that imposes 25 per cent. VAT on a schoolboy's canoe but exempts the golfer and the polo player. It is a value judgment that has been so riddled with holes during the debates on this subject that any honest Minister would have agreed long ago that there was not only no value judgment but no valid justification for what was being done.
I do not recall a situation in which the Opposition have turned to the Government and said "Tear up this rubbish and impose a heavier tax", because that is what my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) has said on many occasions since the tax was first imposed. He has said that we should restore a standard rate of 10 per cent., which would yield £510 million to the revenue, instead of this special and selective increase that will yield barely half that amount. Why do the Government not accept that offer? Why

do they not say "Done. It will be 10 per cent. It is easier worked out, produces more revenue and is satisfactory from our point of view". The reason is quite clear. It is because last July the Chancellor of the Exchequer thought that he would buy a few votes by cutting consumer taxation so that VAT would go down from 10 per cent., to 8 per cent. He has not had the guts to admit that that was an error. He may not need all the revenue, but he needs part of it. Therefore, he has produced this strange form of taxation which we have opposed throughout the passage of the Bill.
It has been possible in the past for selective taxation to produce serious damage in special industries because of its effect on employment and investment. However, rarely can one have seen so much damage done to so many people for so little return. In Committee the Financial Secretary admitted that a particular tax on aviation would yield no revenue. I asked why we had taxation that will not yield revenue. The answer was that if this item had been accepted it would have made nonsense of the general principle of taxing private flying. No only has this tax not been produced as a result of a value judgment it has not produced special Socialist rewards which will apparently make us miserable in every respect and level us all down so that pleasure can be obtained only by the ordination of the Government. It has not even been able to carry out any political objective. It has failed utterly from start to finish.
I suspect that the argument will be adduced that the Opposition did not make such a song and dance when the Government put 25 per cent. VAT on petrol. The Government will say that we accepted that without much argument. It is a question of administration, the difference between duty—a pure old-fashioned duty originally, I suppose on bottles of brandy from France and pursued over the years into a highly complex mass of legislation—and the attractions of putting on VAT which enables the business user to reclaim the tax in a suitable administrative manner.
It is fair to say that we on the Opposition side of the House looked upon that particular imposition as a form of duty. However, the same argument cannot be applied to domestic appliances, boats.


canoes, aeroplanes, jewellery and photographic equipment. These are quite separate things.
I hope—although I suspect that I hope in vain—that the Minister can give us some simple answers to the one vital question: why is it that the Government have not taken up the offer of the Opposition and increased the basic rate of VAT from 8 per cent. to 10 per cent. to achieve their revenue, to remove the anomalies about which we have complained and, in a simple stroke, to remove from the Bill the whole of the ludicrous Schedule 7 and restore a great element of simplicity to the tax?
I subscribe to the view put by my hon. Friend the Member for Norfolk, South (Mr. MacGregor), that there was a great case for having only one rate from the start and that all the exemptions given have created complications. However, if we re-open that argument we shall be here all night, and that would be quite wrong.
The offer has been made. The difficulties can be removed by one sentence from the hon. Gentleman. I hope that he will see the sense and logic of responding in that way.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The debate started off very narrowly, dealing with subsection (2), which allows the Treasury to vary Schedule 7 by order. The authorisation that we have for dealing with this subsection comes from Budget Resolution No. 16, which was passed by the House. That is the effective answer to the question put by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). However, the narrow point on which the debate started concerns the doubts expressed by a number of hon. Members about the executive power of the Government to tax at a higher rate of VAT those articles which are now taxed at a lower or even a zero rate.
A number of hon. Members, particularly the right hon. and learned Member for Surrey, East (Sir G. Howe), thought that this gave far too much power to the Government. In principle, one can understand that suspicion of the powers with which the Government provide themselves. But this argument was fought out a long time ago, in 1961. During the whole of the period since then we

have seen the ability of Governments to make very large increases of the kind permitted under this legislation.
We must recall that there have been times when by use of the affirmative resolution procedure—this has carried on from purchase tax to VAT—the Government have been able to bring into charge at a different rate those articles that are in charge, as passed under Finance Acts. We must remember that there have been occasions when we have had purchase tax at a rate of 55 per cent.—if I recall correctly. Governments have had considerable powers which, over the period, have not been used in the way that was feared by the right hon. and learned Member for Surrey, East, because in normal circumstances these are used either as a regulator or for administrative order to correct certain anomalies.
That is not to deny that these powers may be so used in the future. I am merely saying how it has happened under successive Governments in the past. I thought that it might be useful to compare the powers given here with not dissimilar powers that were given in the past.
I understand the problems which exist when one moves into a multi-rate VAT. These were raised by the right hon. and learned Gentleman, who was echoed by a number of his hon. Friends. No one can deny that one sets up divisions between the various rates and that there are problems when one starts to re-define the boundaries. The only thing that I can say is that, although obviously one has one's new boundaries, that is not to say that the old boundaries did not cause a number of difficulties.
My hon. Friend the Member for Gateshead, West (Mr. Horam), in opposition to the hon. Member for Hertfordshire, South (Mr. Parkinson) and the hon. Member for Cornwall, North (Mr. Pardoe), pointed out that the single rate tax in itself produced certain value judgments. It is very hard to see what we are doing here as Members of Parliament if we are not passing a whole range of value judgments every day we sit in the House. That is what it is all about. If the decisions are made by themselves because the facts speak for themselves, they do not require hon. Members sitting here to debate these weighty matters. They could be settled much more simply.
We are concerned with the crucial matters on which there is no simple answer, on which there is a whole range of value judgments to be exercised all the time. That is our purpose, and we have to accept that. We cannot concede it to anyone else.
However, the old anomalies were there in very great measure. They were there when we used to make fun of the distilled water on which VAT was being charged, and when children's clothing was zero rated. I think it was the hon. Member for Hertfordshire, South who said what a pity it was that we lost the essential simplicity of the old VAT because we zero rated children's clothing. But we have to make value judgments. We decided that it was very wrong that parents should have to pay VAT on absolutely essential children's clothing. We make these judgments on food and all sorts of essential matters. Who is to say that the House of Commons is wrong when it makes decisions of this kind which are very inconvenient to administrators? It is the task of the House to make judgments of this kind, perhaps inconvenient to the operation and management of the tax but essential for the reasons we adduce in the House.
Therefore, the anomalies may be there, but we try to keep them to the minimum while getting the social advantage we consider is essential.
5.0 p.m.
The hon. Member for Staffordshire, South-West (Mr. Cormack) and the hon. Member for Norfolk, South (Mr. McGregor) made a number of points, but the point they had most in common was about VAT on antiques, particularly those over 100 years old. They will recall that the debate was, in fact, on war medals. I am not disputing that it was rather narrow. I received a very interesting deputation which both I and the Customs and Excise found very valuable. Representations were made on the cascade effect, the question of exports and some other matters. The cascade effect did not trouble me quite as much because it is 25 per cent. on the margin, and I do not think this presents the same problem as exports.
The case on exports was one of the strongest argued by the deputation. If, as was suggested at the meeting, there was

to be an incentive to the export of some antiques, we would need to look at the matter again. We shall be watching the situation carefully in a number of areas to check on the suggestions that were made about how the tax was likely to affect certain industries and the running of some businesses. In the autumn, I shall be looking at a number of areas to see how we can devise methods of keeping a close check on what was predicted and what might be happening.

Mr. Cormack: I am grateful for the assurance as far as it goes, but why is the Minister prepared to close the stable door after the horse has got out? He should listen to the detailed and knowledgeable representations made by people who are in a position to know and to appreciate the implications of the changes. The loss of revenue, as he has admitted himself, will be minimal. Why can he not protect something which is in obvious danger?

Mr. Sheldon: I am surprised the hon. Gentleman should ask me to listen, because I did listen when I saw the delegation and heard the interesting and valuable way in which the arguments were presented. As to closing the stable door after the horse has bolted, this horse has not even started yet. If the hon. Member believes that antiques have left the country in the weeks since 1st May he is overestimating the changes so far. I shall be looking at the changes to come in the way I have indicated.

Mr. Wiggin: There are a number of items on which the evidence is only too clear, in relation to both the higher rate and the selection of individual items for VAT. Can the hon. Gentleman give an assurance that he or his Treasury colleagues will, at the request of the appropriate trade bodies, see delegations at regular intervals, because between the Committee and Report stages there has been an understandable reluctance by Ministers to see delegations?

Mr. Sheldon: I was not referring to the hon. Gentleman in the remarks I was making. I shall be dealing with the points he made.

Mr. MacGregor: I am grateful for what the Financial Secretary has said about exports, but would he also be prepared


to monitor the effects of the cascade element? If antiques are sold many times within 10 years, 25 per cent. on the margin could have quite a significant effect on prices.

Mr. Sheldon: I have said that I want to find ways of ensuring closer scrutiny of the effects of changes introduced by the Government so that they can be brought to the attention of Treasury Ministers more easily than in the past. I am always happy to receive information from hon. Members or anyone else about the way in which these matters may be changing.
I understand the burden of the 25 per cent. rate on some industries. There are problems which arise whenever taxes are changed, and there have been problems in the way in which the new higher rate of VAT has been introduced, but it is sometimes a little difficult to separate other problems which arise at the same time. There have been a number of representations from people who have told me about the effect of VAT on their businesses, and sometimes it has been rather difficult to separate the result of the increase tax on an industry's operations. If there had been no change in VAT there would still have been a declining output in some industries because of the lack of sales. Some industries also suffer from seasonal elements, and the economic climate impinges on the spending of many people, which also has an effect on the performance of some industries. I only mention this to show that the problems are a little more complex than they sometimes appear.
We have heard about many of the anomalies involved in a multi-rate VAT, but there are also anomalies in a single tax rate. I am not going to trade anomaly for anomaly, though I could if I wished. There are anomalies inherent in any form of indirect taxation. As long as we have an indirect form of taxation, we shall have to draw the line here or there, and anomalies will be created automatically, whether in excise duties, tobacco duties or in the general indirect field. We are trying to reduce them in the same way as has been attempted in the past with purchase tax and VAT. We shall have to continue this operation whether we have one, two or three rates.
Countries on the Continent have more than one positive rate of VAT. They are firm adherents of the principle of a multi-rate VAT. They have a much longer experience of the system than we have, and it should not be assumed that they are completely wrong. I do not adduce that as evidence that we are so right, but I would say to those who claim that the old system was an ideal, comprehensive, broad-based tax, free from anomalies, that it never was and never could be.
We have brought in these changes in the way the Chancellor of the Exchequer said would be necessary to carry out his economic purposes. I hope they will be accepted by the House.

Mr. David Howell: The House will be glad to hear that the Financial Secretary will be looking at the working of this tax in a number of areas and, I hope, reaching fresh judgments about the decisions the Treasury has been putting forward for us to put into law. We hope he will be able to report to the House on some of his conclusions as he goes along.
My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) is unable to be here for the conclusion of this short debate, and he has sent his apologies for his absence. He has made clear, as we all have, that we are totally against the high rate of VAT on so-called non-essentials and that we believe that the revenue would have been better protected by the 10 per cent. VAT, which should never have been lowered to 8 per cent. for electioneering purposes last year. In that way the revenue would more than be secured, although I do not think that I need to tell that to the Financial Secretary since he appears to have recognised the point by omitting any reference to it from his speech.
There is no suggestion that we are in any way threatening the revenue by our total opposition to the 25 per cent. rate. We are more than protecting it, and if the rules of order had allowed we would have moved amendments accordingly, but we are barred from doing so. The question of the power under Clause 17(2) is one to which my right hon. and learned Friend referred in opening the debate. I take his point. I think I am right in deducing from what the Financial Secretary said that under the old purchase tax regulation it was possible to introduce an order


which would transfer an item overnight from a zero rate of purchase tax to a very high rate, and in that sense there is nothing new in this development. However, it is still most worrying, and I do not think it is one we should necessarily accept uncritically just because it has been going on for 10 years or so.
It means that by Treasury order the tax on an item can be tripled from 8 per cent. to 25 per cent. or increased from zero to 25 per cent. The order to do that is subject only to the affirmative resolution procedure. It is a development which should worry both sides of the House.
We come now to the various defences which have been advanced by the Financial Secretary for the decision to go for the high rate VAT, to which we take strong exception. The hon. Member for Gateshead, West (Mr. Horam) was not at our debates in Standing Committee and, therefore he might not know that his suggestion that this is all a question of a reflection of social attitudes is from his point of view a most dangerous line to take. The Financial Secretary, who began our debates in Standing Committee as the Minister of State, put that argument forward in the early stages but wisely retreated from it. It is a total absurdity. There can by no stretch of the imagination be a set of social attitudes which identifies irons and refrigerators as more reprehensible and less desirable than stoves and ordinary kitchen equipment.

Mr. A. J. Beith: Does the hon. Member for Guildford (Mr. Howell) agree that the remarks by the hon. Member for Gateshead. West (Mr. Horam) will be more acceptable if he applies them with equal consistency to electrical repairs?

Mr. Howell: There is no doubt something in that point, and we shall be dealing with it in later amendments.

Mr. Horam: The fact that these anomalies exist does not destroy the fundamental case for having two different rates of tax upon goods.

Mr. Howell: The Financial Secretary has deployed his argument about the anomalies, saying "They exist anyway, so why not have more?", but I am concerned with the argument that there is a

Socialist attitude and a scale of priorities which puts a kettle lower down the scale than a convector heater, a fire or a table lamp; an attitude which determines that a coffee percolator should have lower qualities for Socialist approval than a geyser, a floor or table lamp or an illuminated mirror. Of course, the Financial Secretary is right that we make value judgments, but we try to be aware of our limitations. We try to call a halt before plunging into these absurd divisions between one sort of item and other.
5.15 p.m.
After his Budget Statement the Chancellor of the Exchequer went on television and said, in referring to the higher VAT rate apply to non-essentials:
I dare say many of us would be none the worse for cutting down on some of those.
But he was talking about cutting down on irons, washing machines and refrigerators. I understand that about 7½ million women go out to work each day. It falls upon them to do the washing and the ironing, and to them these items are essential. It is absurd for the Chancellor to categorise them as non-essential. It is more than most people can stomach to be told that these items get a lower rating of Socialist approval. When those 7½ million women come home from work at night these items are essential to them. We therefore should reject any attempt to intellectualise the argument by decorating these items with a higher or lower level of Socialist morality.
The same argument goes for television rentals. The current rates will be badly hit by the 25 per cent. VAT. I cannot understand why they should be rated as non-essential or suffer the mark of disapproval in the Socialist pantheon. Twelve million homes rent television sets, and these include the poorer sections of the community and the old people who rely on the television as a companion. The Financial Secretary can say that the Government have decided for reasons of revenue to take £100 million from this group, but I hope he will please refrain from asking us to swallow the proposition that this is in some way a reflection of Socialist attitudes and of an attitude of society and accords with the proper priorities of the consumer in the Socialist State.
There can be nothing in that argument, and I think that the hon. Member for


Gateshead, West would have been wiser to have kept well clear of it. That is the wisdom that the Financial Secretary learned in Standing Committee. There is no mileage in it. Let him reconcile himself to the hard realities of seeking out a means of raising revenue and accept that that is the reason behind this high rate of VAT. Behind it, however, are a lot of totally unsubstantiated and ill-thought-out propositions about how the Government can somehow get at luxuries and non-essential goods. Their effort to do so leads to absurdities and offensive categorisations that we cannot accept.
There are other difficulties of a general kind which we raised in Standing Committee and about which we should like more clarification from the Financial Secretary. He will not necessarily give it in this debate, because he has already spoken, but perhaps he will deal with them later in the evening. There is, first, the continuing muddle over the status of certain standard goods which are listed in the schedule and which include things like nuts, bolts, screws, screw caps, nails, washers, rope, adhesive, wires and so on. They are listed in the schedule as being subject to the standard rate, but the schedule goes on to say that the standard rate applies except when they are supplied in connection with a service which is itself chargeable at the higher rate. This is a sentence that creates all the muddle, because it means that if a rope, chain or wire is supplied as part of a repair job on a boat, or a nut, bolt or screw is used in a repair job on a television or kitchen mixer it is liable for the higher rate of tax. We have had no clarification of this point, and great confusion exists over it. When these items are supplied as part of a service, are they chargeable at the higher rate or not? Until this matter is clarified great confusion will continue to exist at the retail level.
The Financial Secretary said that the higher rate was not having an impact on some industries. He argued that we should not confuse that with the development of the economic cycle. I am not sure about that. In Committee the Financial Secretary mentioned the revenue which he hoped to collect as a result of the high rate of VAT on caravans. It was clear that he took no

account of the elasticity of demand and the effect that the higher charge on caravans would have. It is absurd to say that trebling the rate of tax will not have a depressing effect on the demand for the goods in question. It could probably be proved that the effect of a sharp rise in the tax on caravans, small boats and canoes will be a reduction in revenue. We may find that the measures will reduce the revenue rather than increase it. They have already had a devastating effect on production and sales.
The anomalies argument is silly. The Financial Secretary told us that there were anomalies when VAT was levied at 0 per cent., 8 per cent., and originally 10 per cent. No one disputes that anomalies existed. However, if he says that three rates of VAT will not produce more anomalies, that is more than we are prepared to believe. The fact that there were anomalies previously does not improve the case for multiplying them by one and a half times.
The increase in the VAT rate will produce anomalies not only in terms of numbers but in terms of absurdities, idiocies and divisions between the good and bad items, such as the difference between telescopes used for terrestrial and astronomic purposes, and the right and wrong kinds of television equipment, clock radios and convector heaters. It will carry us into a world of anomalies far exceeding the former degree of absurdity. It cannot provide any justification for proceeding with this tax.
This is the wrong way to go about this matter. It is untimely and damaging. It will cause the loss of many more jobs and more dislocation in the industries concerned than the increase from 8 per cent. to 10 per cent. recommended by the Opposition. We think that the arguments are spurious and should be vigorously opposed. We intend to oppose later amendments. We shall vote on some amendments. However, we intend to leave the Minister with the power specified, as without it he would not be able to introduce the amendments we favour.
We oppose the feebleness of the arguments and the general case for introducing a nonsensical tax on a nonsensical basis of priorities to the great damage of this country.

Mr. Anthony Fell: I apologise as I was unable to be present at the beginning of the debate on the amendment.
The question of electrical components was discussed at length in Committee. I shall endeavour to keep my remarks in order, as otherwise I shall be in trouble with the Chair.
I wish to speak about Erie Electronics, in Great Yarmouth. The goods which it produces are subject to a 25 per cent. rate of VAT. I wish to demonstrate what may happen to other firms if a similar rate of VAT is imposed on their goods. They will encounter the trouble experienced by Erie Electronics. That firm faces a monstrously difficult position. For instance, one small boatyard in my constituency has already closed. I agree that there are many factors which combine to make a difficult situation.
The Minister spoke of essentials and non-essentials. This Government—of all Governments—say that employment is the first essential. However, 900 people have been put out of work over a short period of time from a plant which used to employ about 3,000 workers. This is a serious matter for a semi-industrial town such as Yarmouth. It spells the most fearsome future for it.
I am using this amendment to persuade the Financial Secretary to ask the Chancellor, to whom I have written about this matter, to reconsider the situation.
Electronics, which may perhaps be considered non-essential goods, face strong competition from Japan. The enormous rate of VAT being levied on those goods is having a dreadful effect. I have received a letter on the matter from the works convener at the factory. This underlines the point that the workers are frightened of what will happen to Erie Electronics if nothing is done to improve the situation.

Amendment negatived.

Schedule 7

VAT: HIGHER RATE

Mr. Robert Banks: I beg to move Amendment No. 108, in page 86, line 1, at end insert—
(ii) burglar alarms and ancillary equipment".

Mr. Deputy Speaker: With this it will be convenient to take Amendment No. 121, in page 86, line 5, at end insert—
(l) distress alarms and door entry systems for the elderly, disabled or handicapped".

Mr. Banks: In Committee I drew attention to the introduction of varying rates of VAT applicable to burglar alarm systems. I owe a debt to my hon. Friend the Member for Braintree (Mr. Newton) for raising this matter in Committee.
In my constituency there are two small firms which sell burglar alarm systems and parts, and undertake the installation themselves or through other manufacturers.
The number of rates of tax and their application as established in the Bill are confusing. There is a zero rate, an 8 per cent. rate and a 25 per cent. rate. Basically, the 25 per cent. rate applies to burglar alarm systems suitable for domestic use. The problems which this differentiation brings are considerable. A great number of systems are used for the protection of domestic property and for commercial or industrial buildings. The commercial type is rated at 8 per cent. The question of the meaning of "domestic use" therefore arises. A private school, a boarding house, a small hotel or a large country house can acquire an installation every bit as complicated as, and possibly identical to, that fitted in a warehouse, a factory, a shop or an office building.
5.30 p.m.
There are many anomalies. For instance, a first-time installation put in during the construction or alteration of a building is rated at the zero rate. What then is the definition of "alteration"? Does an alteration mean the addition of a few new windows, an extension, or what? That is another question that must be answered.
Repairs to existing systems, depending on whether the system is suitable for domestic use and irrespective of the type of building it protects, carry the 25 per cent. domestic type rate. If the system is not suitable for domestic use it carries the 8 per cent. rate. How do companies discover what sort of system they have if it was installed several years previously?
This demarcation applies also to parts supplied and rental charged. Rental for the first year after installation is zero rated. Banks are singled out for the 8 per cent. rate, whatever type of system is used, because of their high security risk. Why should not a sub-post office enjoy the same privilege? It is every bit as vulnerable as a bank, if not more so. A sub-post office has to pay 25 per cent. if it chooses a domestic type of appliance to suit the building.
A person who buys the parts and installs the system himself has to pay 25 per cent. if the appliance is of the domestic type. Here again, a shopkeeper or a person who runs a small business and may need a domestic type of installation is penalised. The person who wishes to install his own system in his own house has to pay the higher rate.
This policy works against the efforts of the police to prevent crime. The police deserve our support, but this fiddly legislation will only produce complications and make necessary confusing explanations.
I have this axe to grind because I see this as a bad Government decision which should be reversed, not only because of its adverse effects on the police in their attempts to prevent crime, but also because of the effect which confusing and varying rates will have on companies whose paper work will be considerably increased in administering the different rates. I see no sensible reason for this policy.
The amount of revenue that will be produced is not known. Even so, it must be small. I imagine that a great number of people will suddenly find that a commercial type appliance has been installed. There has been no determination of exactly what a domestic type installation looks like or what it is composed of.
I therefore ask the Financial Secretary to accept the amendment, to exclude all types of burglar alarm system from the 25 per cent. rate and to make an announcement to that effect in the debate.

Mr. Tony Newton: I should like briefly to support my hon. Friend the Member for Harrogate (Mr. Banks). He referred to my remarks on this subject in Committee. I shall not

attempt to add to what he said beyond pointing out, as I did in Committee, that it is farcical that the Home Office should spend large sums of public money in encouraging citizens to prevent crime while the Treasury is intent on making it far more expensive for people to protect themselves against theft.
Although I realise that the Financial Secretary will not accept the amendment in view of what he said in Committee I hope that he will consider this subject as a candidate for one of the orders he is to make, according to his recent statement, if for no other reason than that if the Treasury do not encourage people to hang on to their possessions there will be nothing for the Treasury to take in wealth tax when the time comes.
Amendment No. 121 concerns distress alarms for the elderly, handicapped and disabled. It takes me back to the day in Committee when I was left almost speechless because the Financial Secretary undertook to consider the points raised by two successive amendments I had moved. We were overwhelmed by his helpful approach at that time. He said:
I should like to go into this a little further, coming back on Report after a more satisfactory investigation which I intend to follow up."—[Official Report, Standing Committee, H, 17th June 1975 c. 185.]
He was referring to the possibility of the 25 per cent. rate of VAT being charged on bells and distress alarms for the severely disabled, the handicapped and the elderly. I do not want to press the Financial Secretary beyond asking him to clarify the position and, if possible, to indicate his intention when he starts to make orders in accordance with his recent announcement.

Mr. Robert Sheldon: The rates of VAT applicable to burglar alarms—

Mr. David Howell: I apologise for intervening before the hon. Gentleman has got going, but I want to ask about his general approach to the amendments before he goes into the details of this one.
A few moments ago I spoke about the orders which the Treasury is to bring in under Clause 17(2), and I said that the negative resolution procedure would be used. The Financial Secretary interrupted to say that the procedure would be the


affirmative resolution procedure. In his statement to the House he said:
The reliefs I have announced have, of course, still to be the subject of legal drafting and the Treasury order itself will be subject to negative resolution procedure."—[Official Report, 16th July 1975; Vol. 895, c. 1531.]
Which is right? Is the procedure for the orders already agreed to be different from that used for future orders, or is the Financial Secretary wrong in what he said this afternoon and right in what he said on 16th July? This matter should be clarified before we get to the details of the amendments.

Mr. Sheldon: If I might go on with what I was saying about the matter under discussion, I shall deal with the point raised by the hon. Member for Guildford (Mr. Howell) later.
The position about the burglar alarms is that before the introduction of this legislation there were two rates. A buglar alarm which was installed during the course of construction or alteration was zero rated. If a burglar alarm was bought and installed by a person it was rated at 8 per cent. There has always been a difference in treatment according to whether the burglar alarm was installed during construction or alteration or whether it was installed subsequently. The hon. Member for Harrogate (Mr. Banks) is aware of that position.
For the installation of a burglar alarm suitable for domestic use, instead of 8 per cent. the rate is now 25 per cent. The position remains as it was before, except that if a burglar alarm suitable for domestic use is put in afterwards, or is subject to a rental agreement subsequently, after the first year it will be rated at 25 per cent, instead of 8 per cent. I hope that clarifies the matter.
I understand that the hon. Member for Harrogate has a constituency interest in this, and I hope that what I have said will be of assistance to him. Perhaps I should say that, following the representations that the hon. Gentleman made, there were some meetings with the British Security Industry Association to try to define the area between special concession systems and systems suitable for domestic use. We tried to get clarification, and I think that we have achieved that division satisfactorily for the time being.
The hon. Member for Braintree (Mr. Newton) referred to distress alarm systems and door entry systems for handicapped people, and the marketing of such systems commercially. Many of these systems are designed particularly for the severely handicapped but many of them are modified versions of systems of more general application.
The distress alarm or door entry system that is installed as a fixture in the purpose-built home for handicapped people is zero-rated under the ordinary provisions applicable to construction. If a system is installed in the home of a handicapped person under the terms of the Chronically Sick and Disabled Persons Act 1970 the supply of the equipment will be charged to the local authority and the tax may be refunded. From investigations that I have carried out it seems that many systems are installed in that way. However, we all know that the performance of local authorities in these matters tends to be variable. I accept that there could be a problem when a handicapped person has a system installed.
The treatment of these items is still being discussed at official level with the Department of Health and Social Security. I am sorry to say that we have not reached the final stage of considering specific proposals. I can assure the House that the discussions are continuing. We have hopes that we might be able to come to some suitable outcome.

Mr. Newton: I take the Minister's point, but it does not seem to me that he is providing an entirely satisfactory answer. I am glad to hear that discussions are continuing, but I hope he will do his best to ensure that no one is left in the position of having to pay a substantial extra tax burden on a piece of equipment which could be said to be essential. The Minister, in his reply to me, specifically referred to our discussions in Standing Committee. I refer the Minister to column 185 in the Official Report of Tuesday 17th June, where I made a point about pensioners. The hon. Gentleman has referred to the handicapped but will he turn his attention to old people's homes and pensioners?

Mr. Sheldon: To do anything for pensioners would involve a wide range of considerations. Many of the systems that


we are discussing are suitable for purpose-built homes of the kind that I have described. I have undertaken to proceed further as regards disabled people.
Next, I refer to the question raised by the hon. Member for Guildford. He said that he was worried—I understand his great concern—about the large increase that might be levied under value added tax. I compared the position with the purchase tax arrangements, and showed how those arrangements had operated under a number of Governments and had met with the general approval of the House. These matters will continue in the same way to be subject to affirmative resolution.
We are discussing what will be reliefs under the statutory instruments. Relief as such is subject to the negative procedure.

Mr. David Howell: Are we to understand that the orders to be made governing the items for which concessions were made before our proceedings in Standing Committee are to be under the negative resolution procedure, and that any future orders that arise from any further changes of the Government's mind will be under the affirmative resolution procedure? Does that mean that, whether or not they are made during the recess, we shall have to debate them in due course according to the affirmative resolution procedure?

Mr. Sheldon: I thought that what I said was clear but I shall repeat it. It is right that concern has been expressed about increased taxation. If additional taxation is required it will be subject to affirmative resolution, but if reliefs are involved the negative resolution procedure will apply.

5.45 p.m.

Mr. Newton: I make one final point before the Financial Secretary sits down. I sense that he is rather uncomfortable about this situation. I also sense that it is extremely unlikely that we shall get a satisfactory outcome following the discussions that are taking place. Should not the hon. Gentleman consider exempting bell systems and door entry systems altogether from 25 per cent. VAT? As he says, they will be zero-rated if they are built into new construction because new construction is zero-rated. In practice

that must be the way in which the vast majority of these systems are installed. However, people who become disabled or grow old and require assistance will be installing these systems. The Government would lose very little revenue and avoid the problem altogether by chopping the item out of the 25 per cent. VAT bracket.

Mr. John Nott: I cannot let the debate conclude without saying that the Financial Secretary's arguments are increasingly absurd. It is nonsensical that we have to go through this farce every time we argue Schedule 7 matters. It is no use the Financial Secretary going back and saying that in the original legislation if a burglar alarm was part of a building and was inherently part of a new structure it was zero-rated and if it was subsequently installed it bore the basic rate of tax. The fact is that under these new arrangements if an alarm is installed it will bear the 25 per cent. rate, whereas virtually every other sort of security device, a lock or whatever, bears a rate of 8 per cent. when installed. It is ridiculous that burglar alarms should bear the higher rate for no purpose that can be understood by anyone apart from those occupying the Treasury Bench.
There are two rates being levied on safety devices, devices which are necessary for the security of a home. Day after day we hear from the Home Office, from other Departments and from the police of the necessity of securing our homes against burglars. That is said by various Departments, but the Treasury Bench chooses to place on burglar alarms the 25 per cent. rate whereas every other security device bears a rate of 8 per cent.
In answer to the points that my hon. Friends have raised, the Financial Secretary has said "But when you were in office you brought forward a measure which involved a zero rate and a basic rate". The Government are continuing with a basic rate of 8 per cent. and adding the 25 per cent. rate. No one can understand the difference between burglar alarms and other security devices. That is what we are complaining about. The ponderous style of the Financial Secretary might well help those who suffer from insomnia, who instead of counting sheep jumping over a stile can come along to these debates and listen to his replies, but his style does not alter the absurdity


of his replies. That absurdity is becoming more and more obvious as the debates proceed.
I hope that at the end of the next debate we shall have a more sensible reply which will distinguish between the Government's creation of four rates of VAT and the original legislation which provided for zero rating and a basic rate. As my hon. Friend the Member for Guildford (Mr. Howell) has said, zero rating was requested by the then Labour Opposition. It is no good throwing the matter back at us.
We are debating why a burglar alarm should bear a rate of 25 per cent. and every other security device a rate of 8 per cent. We have had no answer on that point whatever. We should not put legislation of this nature on the statute book.

Amendment negatived.

Mr. Wiggin: I beg to move Amendment No. 22, in page 86, line 23, at end insert:
'(g) shackles and bottle screws'.
This earth-shattering amendment, which is of immense importance, has been tabled because it highlights the anomaly created under Schedule 7. I understand from a number of sources, not the least of which have been the retailers of hardware items, that because some shackles and bottle screws and other items of fittings for wire ropes can be used as rigging on boats, the Customs and Excise authorities, ever sleuth-like in looking for the smallest possible loophole, have assessed all these things at the higher rate. Therefore, in some small Midland town, 80 or 100 miles from the sea, a farmer or ordinary householder buying an item for his garden fence has to pay 25 per cent. VAT.
When Item No. 5 was drafted, obviously the drafters of the legislation appreciated that some items such as nuts, bolts, screws, hinges, wheels and other bits and pieces, finishing with sewing machine needles, should be exempted. It is absurd that these tiny bits and pieces such as shackles and bottle screws should be included.
Although my amendment is specific, I hope that the Minister of State will accept that it raises as much a point of principle as of detail. I hope that the

amendment will receive a favourable response, even though the Government have already indicated that they will not accept it.

Mr. Hector Monro: I support my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) who in Committee carried out a tremendous battle on behalf of the boat building industry. I agree with him that Amendment No. 22 raises an important matter of principle.
In Committee the Government argued that they had included boats within the VAT increases because they related to so-called "large ticket items". In the amendment we are dealing with minute items—with something as small as a thumb nail or as large as a man's hand. I should be interested to know the answer to the question "When is a screw a bottle screw?" In the present economic crisis, it is astonishing that the Government seek to create anomalies of this kind.
In Committee upstairs, on 24th June, in c. 369, the Minister said, in a somewhat muddled way, that ropes and chains were not part of boats. I wish to know when a bottle screw has been classed as not part of a boat. Umpteen fathoms of chain may be charged at 8 per cent., the anchor at the end at a similar figure, and the shackles holding them together at 25 per cent. This is monstrous nonsense. If the Government persist with legislation of this kind, I shall be surprised if the House rises before the end of August.

The Minister of State, Treasury (Mr. Denzil Davies): The amendment seeks to add shackles and bottle screws to Item 5 in Group 1. That group of items deals with matters of general use such as nuts, bolts, nails and hinges. They were specifically excluded because they are recognised to be items in general use.
The reason why I cannot accept the amendment—although I may be able to say something which will go part of the way to satisfy the hon. Member for Weston-super-Mare (Mr. Wiggin)—is that it is not conclusive that shackles and bottle screws, whatever their virtue, might be items of general use, although I can think of many uses for shackles. But the Customs and Excise authorities do not regard shackles and bottle screws as items of such


general use that they can be brought into the category of items listed in Item 5.

Mr. Nott: The Customs and Excise has agreed with manufacturers a whole long list of components used in a vast range of goods which they have decided are "parts of goods" for the purpose of this definition and should bear a 25 per cent. rate of tax, even though they are used universally in many different kinds of appliance. If that is the case, why is it that these particular items are singled out as being essential goods when others, which appear to be as essential to any sane, normal person, are singled out as being parts and bear a rate of 25 per cent.? What is the logic behind the list?

Mr. Davies: The logic is that those goods, such as nuts and bolts, are goods in general use. We cannot accept the amendment in respect of shackles and bottle screws because such items are not considered to fall within the category in Item 5.

Mr. Nott: But a sewing machine needle is surely used as a specific item. Any normal member of the public knows that a sewing machine needle is used in a sewing machine.

Mr. Davies: Having anticipated that point, I took the opportunity to ask the Customs and Excise authorities why they had included sewing machine needles among items of general use. The answer is very clear. Electric sewing machines are charged at 25 per cent. but hand sewing machines at only 8 per cent. Sewing machine needles can be used for either electric or hand sewing machines. Therefore, sewing machine needles have to be included in items of general use, although I accept that they are not in as general use as are nuts and bolts.

Mr. Nott: Where can an electric filament be used except in an electric filament light bulb?

Mr. Davies: Perhaps I should leave these matters to my hon. Friend the Financial Secretary, who is an engineer. I cannot take the matter any further I did not ask the Customs and Excise authorities about electric light filaments.
The fact is that we do not accept that shackles and bottle screws are items of general use but, on the other hand, the

Customs authorities recognise that shackles and bottle screws may be used for non-marine general purposes. We accept that some specific shackles and bottle screws may be used only in larger boats which are zero rated. For that reason, because there might be an anomaly in those cases and because specific shackles and bottle screws might be used only in larger boats not subject to zero rating, discussions are taking place between the Customs and trade organisations to see whether we can introduce uniformity into the situation.
6.0 p.m.
We may still not be able to iron out all the anomalies, but the hon. Gentleman can be assured that we are looking at the matter in the hope of being able to draw a distinction between items of general use and items which might be used specifically in boats carrying 25 per cent. VAT and boats which are zero rated. At least I can go that far. For the reasons I have given, nowever, I cannot advise my hon. Friends to accept the amendment.

Mr. Nott: The Minister was kind enough to say that his hon. Friend the Financial Secretary was an engineer. May we therefore have an answer from the engineer on the Treasury Bench about where an electric filament is used except in an electric filament light bulb?

Mr. Wiggin: I think that what has escaped the Minister of State—there might have been a slightly misleading element in the wording of the amendment—is that this matter was raised not by the boating industry but by the hardware industry. Bottle screws particularly are used in fencing, and cheap galvanised bottle screws can be bought anywhere in the countryside, but because the Customs and Excise authorities knew that the same manufacturer made the most beautiful chromium-plated bottle screws for boats they said that they should all be rated at the higher rate of VAT. As my hon. Friend the Member for St. Ives (Mr. Nott) said, because of the operation of VAT the Customs and Excise has issued long lists which have often had mistakes in them.
I accept that the Minister of State has taken this particular point on board. There are a lot of others of a similar type. When the hon. Gentleman prepares


the orders, which I look forward to seeing, I hope he will bear in mind seriously the points that have been made today.

Mr. Denzil Davies: I am now given to understand that these light bulbs are used as parts of film projectors, which are rated at 25 per cent.

Amendment negatived.

Mr. Pardoe: I beg to move Amendment No. 21, in page 86, leave out lines 24 to 26.

Mr. Deputy Speaker: With this we are to take the following amendments:

No. 23, in page 86, line 24, leave out 'repair or maintenance of'.

No. 26, in page 87, leave out lines 10 to 12.

No. 44, in page 88, leave out lines 20 to 22.

No. 47, in page 89, leave out lines 4 to 6.

No. 48, in page 89, leave out lines 40 to 42.

No. 50, in page 90, leave out lines 22to 24.

Mr. Pardoe: This amendment is concerned with safety, a subject which was debated at some length in relation to a similar amendment in Standing Committee. But it is also concerned with conservation, and I wish to deal briefly with both aspects.
In the Committee stage the Financial Secretary said that the cost of accepting an amendment of this kind would, he thought, be approximately £30 million. That is not a small sum of money, but if we could show that by accepting the amendment—which would reduce the rate of VAT on the servicing and the repair of a whole range of items—we were able to increase the safety of these items, particularly in the homes of people who use them, it would be £30 million well spent. I am sure the Government could hardly say that that was not the case.
The Financial Secretary tended to write off the question of safety. It was not because he did not believe in it—he quite clearly nailed his colours to that mast—but I think he was tending to say in his argument that we were dealing with articles which were of a fairly high price anyway and that, therefore, the increase from 8 per cent. to 25 per cent.

on the cost of servicing particularly might not be a sufficient deterrent.
The other part of the argument was that the process of home servicing—do-it yourself servicing—was very much a continuing one and that, therefore, the increased tax would probably make very little difference to it. I do not accept that argument. I still believe that the increased tax, from 8 to 25 per cent. adding £30 million to the cost of repairs, will he a disincentive to having these items repaired properly.
A number of the items mentioned in the schedule are electrical items and clearly need regular servicing. When there is any indication that anything is wrong with them, they need to be looked at and repaired by people with professional and skilled knowledge. These items should not be left to burn in the kitchen or smoke, or whatever else may happen to them.
I should like to concentrate my remarks on a point which was made only very briefly in Standing Committee and to which the Financial Secretary did not reply at all. I hope that he will do so this time. My hon. Friend the Member for Berwick-upon-Tweed (Mr. Booth) said that
if we are continually to exacerbate the present trends for putting up the costs of servicing, we carry ourselves further along the dangerous and ludicrous path to the type of throwaway society in which once an appliance is in need of repair one disposes of it and gets another."—[Official Report, Standing Committee H, 19th June, 1975 c. 263.]
I think that that is absolutely true and that we have already got ourselves dangerously into that kind of society.
The point was well made in the preface to "The Apple Cart" when Shaw talked about "Breakages Ltd"—a kind of shorthand for his concept of the throwaway society. Such a society has a vested interest in ensuring that light bulbs do not last very long and that cookers are made a lot less substantially than 10 years ago, because if they last more than two or three years or can be repaired at the end of that time either somebody will be out of a job or some manufacturer will not make a substantial profit.
The Government have in effect embarked upon a tax policy which will encourage the throw-away society to go


on throwing things away.. That inevitably is what this policy will do. Already the cost of getting electrical articles repaired and serviced is very high indeed because of the labour component. Therefore, to add to that cost, thereby increasing the incentive to throw an item away and get another, seems to be a pity.
I therefore hope that on grounds of safety and of industrial conservation the Government will think again about this range of amendments, in spite of the fact that they rejected this proposal in Committee.

Mr. Newton: I made a long speech in Committee in moving the amendment to which the hon. Member for Cornwall, North (Mr. Pardoe) has referred, and I therefore shall not make another long speech now, but I hope that the Financial Secretary will be prepared to take another look at this matter.
The safety aspect is not by any means the most controversial of the issues raised with the public by the Bill. Television rentals are unquestionably a great deal more controversial with the public, and we shall be coming to that question shortly. But the issue of safety has caused a great deal of concern among large numbers of responsible bodies dealing with the interests of the consumer and with safety in the home, including the electricity supply industry itself.
So far the Government have dismissed the issue altogether too lightly. There has been no convincing argument that the worries expressed by those bodies are wrong. I hope that the Government will not continue to dismiss the safety aspect as lightly as they have done in our previous discussions.
I should like once again to read a paragraph from the "Electricity Supply Digest" issued by the Electricity Council, the body appointed by Her Majesty's Government to run Britain's electricity industry. This is not a body with a simple vested interest but a nationalised industry, speaking with the full authority of the people in charge of the electricity system of this country. The paragraph reads:
Lives endangered. The electricity supply industry is most concerned at the consequences this could have on safety in the home. Even the best electrical appliances can break down or develop a fault, and an unskilled attempt at

repairs may endanger the lives of the owner and his family.
The anxiety is shared by both sides of the House and by large numbers of consumer organisations and representative bodies throughout the country, including those set up to represent the interests of electricity consumers.
As in the case of burglar alarms, we have the situation that the Home Office spends large sums of money circulating pamphlets to every house in the country dealing with the dangers of fire in the home. On almost every page there is a warning about the risk of electricity appliances which are not properly serviced and installed, which are left with wires trailing or which are not connected properly. All these are official worries which have been expressed over a number of years. No one doubts the importance of them. Yet we have a situation in which we have a huge increase in the practice of people installing, servicing, repairing and maintaining electrical appliances which can be a source of considerable danger.
The Bill will make for difficulty in both ways. It will make it more expensive to replace old and out-of-date appliances, because for the most part they now bear the 25 per cent. rate of VAT. It will also make it more expensive to service older appliances which are kept, so that they will be less well serviced.
This cannot be a satisfactory situation. It worries the consumer organisations and the trade organisations which see it as an encouragement to the fly-by-night operator who puts a postcard in a newsagent's window offering to do electrical repairs on a moonlight basis, probably evading VAT in the process. It cannot be satisfactory, and I hope that the Financial Secretary will look at it again.

Mr. Douglas Crawford: I want briefly to support this series of amendments and to endorse what the hon. Member for Cornwall, North (Mr. Pardoe) said.
I come from a Calvinist country, and it may be thought that I represent a Calvinist party. But Scots have a reputation for thrift. Unfortunately, not having been a member of the Standing Committee, I have been unable to follow the arguments in detail. However, I underline the importance of "Waste not, want not", and I hope that the Financial


Secretary will outline the logic of the schedule.
What is the logic of having a high, perhaps a punitive, rate of VAT on the installation, alteration, testing, repair or maintenance of goods when to repair or to maintain them can make those goods last longer? In the current economic difficulties of England, I should have thought that this was a consummation devoutly to be wished for.

6.15 p.m.

Mr. Beith: I share the thought expressed by the hon. Member for Braintree (Mr. Newton) that. although there are other clauses in the Bill which will arouse more excitement among the public at large, there is none which should arouse more controversy and be viewed more seriously by ordinary members of the public than this one.
Our debates in Committee did nothing to convince me that there was any logic in it. There was no basis for the Government's decision, representing as it did, I suspect, a refutation of what had been put to them by responsible bodies both inside and outside Parliament. If one could be privy to the discussions which might have taken place between the Treasury and the Departments responsible for safety in the home it would be a very interesting study. I shall be surprised if the Home Office, the Department of Prices and Consumer Protection and even perhaps the Department of Health and Social Security did not express reservations about the dangers which can be so much exacerbated by this heavy increase in the cost of repairs.
The reply of the Minister in Committee with its reference to do-it-yourself electrical work is one which most of us found extremely worrying. It is all very well to encourage people to go in for electrical maintenance in the home as a do-it-yourself activity. There are excellent evening classes, good books, and all sorts of other means by which a person can become a competent amateur electrician, but there is a world of difference between that and encouraging anyone and everyone to poke about inside the washing machine or some other electrical appliance and to try to put it right rather than paying the cost of getting a man in to look at it.
Large numbers of people will be tempted to indulge in their own servicing or to go in for dangerous amateur maintenance which is not of the serious do-it-yourself kind which a former engineer might indulge in. That kind of expertise is not available in the average home, and the average home is a dangerous place for that reason. If electrical appliances are not properly maintained and installed, they are very dangerous. The risks of electrocution and fire are very serious.
The words which we seek to delete from the schedule refer to the installation, alteration, testing, repair or maintenance of goods. Installation is especially important. There are a number of electrical appliances which, if wrongly installed, can immediately give rise to difficulties and become fire risks. The more complicated the instructions get, especially international instructions, the more difficult it is for anyone to carry out installation properly. Alteration, which many people do in order to get the appliance precisely in the form that they want, should not be done without qualified help unless the person proposing to do it has the kind of expertise which ordinary people do not have. Testing, repair and maintenance are the most important of all. Electrical appliances should be maintained regularly, and inspected when they give rise to trouble, by someone who knows how they work and the dangers involved. That will become very unpopular and difficult if this tax increase is allowed.
All this spells danger, especially to elderly people who are less familiar with and more frightened by these appliances. It spells danger to women living on their own and who have not had the opportunity in their work to learn about electrical appliances. I need hardly stress the danger to children in a house where appliances are not installed and working properly.
The Government's proposal is discouraging in two ways. There is the direct discouragement resulting from an immediate increase in charges. In Committee we had evidence before us about the already high rate of the basic charge of getting in a man to look at a faulty appliance. The evidence was incontrovertible. It now costs as much as £4 or £5 to get a man to a house, whether or not there is anything wrong, and to put up the


cost by a further £1 adds drastically to the discouragement of regular routine maintenance.
Then there is the indirect discouragement. If we make people less likely to carry out maintenance, trader after trader will find that he cannot carry on a proper servicing side to his operation. This trend is more apparent than the Minister thinks. Many traders, especially in the face of competition from discount warehouses, find it very difficult, as it is, to maintain a satisfactory service. Labour charges are a high element. Labour is difficult to get, and the economics of servicing are very much on a knife edge. That knife edge will be affected by this heavy increase in the costs involved.
I cannot see that the Government have any basis for seeking to maintain this feature of their proposals, and the arguments which they have advanced in defence of other features of this Bill cut directly across what they are trying to do here. Earlier, the hon. Member for Gateshead, West (Mr. Horam) tried to put forward an argument, which has been rejected in many other contexts by the Treasury Bench, to distinguish between luxuries and non-luxuries and essentials and non-essentials. Any attempt to apply that kind of logic to this provision makes nonsense. This is a matter that we should encourage, not discourage. There can be no extension of the Government's philosophy, if philosophy it be, to defend what will be the effect of this provision.
If there were any Government supporters here to ask I would invite them to consider what some of their hon. Friends said publicly earlier. The hon. Member for Chester-le-Street (Mr. Radice) signed the original amendment which we discussed in Committee, concerning the safety of electrical equipment. It is a sad day when there is neither the interest in nor the concern for danger in the home that will enable us to ensure that, by a united feeling throughout the House, the amendment is carried and these features are no longer part of the Bill.

Mr. Robert Sheldon: I listened with interest to the further contributions—further to those we heard in Committee —with great interest. They reflected much of the concern that was then expressed.
I shall deal with the points that have been raised in the order in which they were taken up. Perhaps I might refer first to the hon. Member for Cornwall, North (Mr. Pardoe), who was echoed by the hon. Member for Berwick-upon-Tweed (Mr. Beith) and the hon. Member for Braintree (Mr. Newton), who were concerned about the dangers of the unskilled repairer and the problems he might cause. To sum up their position, they wish to see regular servicing of electrical appliances in the manner that was possible in the past.
The hon. Member for Berwick-upon-Tweed knows very well, because he used this argument in at least one context in Committee, that for a number of appliances the kind of servicing of electrical appliances that used to exist years ago has diminished almost to vanishing point. There are many towns where for certain kinds of equipment there is no regular servicing. The reason is that the cost of an individual visit by a service man with his bag of tools and his oil can is prohibitive, and travelling costs and parking difficulties have increased to such a degree that such a service has ceased to be economic.
The type of service that was possible for a whole range of appliances has rapidly diminished, and it has tended to be replaced by the type of repair service that we now know. I think that in a number of speeches there has been a lack of distinction between those two points. We are more and more concerned with the possibility of repair rather than with servicing. The hon. Member for Berwick-upon-Tweed adduced some interesting figures about the cost of each visit. He went into the matter in some detail, and I give him full credit for the information he put before the Committee on this matter.
There have been attempts by many manufacturers—not as many as one would wish—to improve their reliability so that the cost of servicing and repairing diminishes. Although there are complaints from time to time, my impression is that, at least over a wide range of electrical appliances, reliability has improved.
The difficulty about finding grounds for exempting servicing, quite apart from the financial aspect which I shall come to later, is that although the hon. Member for Cornwall, North made an emotive


plea against the throw-away society, often the most convenient method of approaching the problem is not to throw the appliance away but to exchange a defective part which can be renewed or repaired in the factory rather than to make adjustments in the home. This is an increasing facility and one that most people would welcome.
When we talk about the sale of spare parts, we must concede that the rate of VAT must be the same as the rate for the whole appliance, otherwise we would find ourselves reverting to the nonsense whereby kits of parts used to be at different rates of tax from the whole appliance. To avoid that anomaly, both must be rated at the same rate of tax. The replacement of units rather than actual repair has increased not only with motor cars but with domestic appliances.
I turn to the dangers inherent in unskilled repairs. I fully accept the point made by the hon. Member for Perth and East Perthshire (Mr. Crawford) and the hon. Member for Berwick-upon-Tweed. I should like to be as neutral as possible and I hope that I shall not be quoted as giving endorsement to that view. However, in a Sunday paper which has a readership, as far as I can estimate, not far short of 10 per cent. of the population, there has been a series of articles on how to rewire the home. It is not for me to say whether that is a good series. I only draw attention to the level of sophistication that at least one Sunday newspaper believes is possessed by a considerable proportion of the population. I hope that those concerned take full account of the problems involved.
I accept that servicing is declining. We are talking in the main about fairly expensive articles, but the extra cost of servicing such articles has to be seen in that light.
I fully understand the concern that is expressed about safety. My view of society suggests that the kind of experiments which are made are likely to be carried out with greater regard to safety than perhaps used to be the case. That is only a personal observation but I have not seen any direct evidence to controvert it.
However, the financial side must be considered carefully. We are talking

about £30 million, which is a considerable sum, and an increase in the number of anomalies of a kind that it would be almost impossible to defend in practice when the operation of the tax is under way during the general course of events. For these reasons I cannot ask my right hon. and hon. Friends to accept the amendment.

Mr. Nott: During this short debate I think there has been a maximum of four Labour Members in the House. This is quite astonishing when we consider that we are debating a 25 per cent. tax on the future repairs of domestic appliances which go into virtually every home in the country. It may be that Labour back-benchers have not taken the trouble to find out the subject of our debate. I think that it would have been beyond belief if two years ago someone had said that the incoming Labour Government would single out the repair and maintenance of domestic, appliances—washing machines, refrigerators and all the other essential appliances that are used in every home—and apply to them a 25 per cent. rate of VAT.
Virtually every Government publication warns people against accidents and fires in the home, yet the Treasury come before us with this measure and excuse it because it is said that it would create anomalies if there were to be a 25 per cent. rate on a domestic appliance and a basic 8 per cent. rate on the repair of that appliance.
6.30 p.m.
The Financial Secretary said that the kind of servicing that we used to know has disappeared to vanishing point. What exactly does that mean?—[Interruption.] The hon. Gentleman may have qualified it, but even when qualified what does that statement mean? Does it mean that when a housewife has a faulty refrigerator she must discard it and buy another? It is not true that the kind of servicing, to use the hon. Gentleman's words, which we used to know has disappeared. At some time or other every household in the country has called in someone to repair a domestic appliance as a matter of course.

Mr. Robert Sheldon: The hon. Gentleman is not drawing the distinction which I drew between servicing and repair. Surely he understands the distinction between them.

Mr. Nott: The parts used in the repair of domestic appliances also bear the higer rate of 25 per cent. The Financial Secretary went into a long rigmarole about sending away to a factory for a part. Presumably that part, when it comes back, needs to be put into the domestic appliance by a fitter and will bear the 25 per cent. rate when it is put in. Therefore, I am unable to understand what the hon. Gentleman was saying.
We must concede that, with the absurdities that this higher rate throws up, there would be a great loss of tax if the servicing and repair of appliances were not to bear the same rate as the appliances themselves. However, that does not mean that we must concede the principle of a 25 per cent. rate on repairs. Surely, when the Government were considering whether to bring in a higher rate of tax they should have taken this matter into account.
We come back to the claim that we have made since the outset of these debates—that the Government could have raised the same amount of revenue with far less trouble if they had sought to bring forward a 10 per cent. rate of VAT

right across the board. That would have been entirely acceptable to the country. People would have understood and accepted a 10 per cent. rate. It was the rate they had until the Chancellor, just before the General Election, reduced it. It was the reduction of the rate from 10 per cent. to 8 per cent. which enabled the Chancellor of the Exchequer to go on television during the election and claim that inflation was down to a rate of 8½ per cent. It was that very cut in VAT from 10 per cent. to 8 per cent. which enabled him to make that scandalous claim.

The Government have now come back with a rate not of 10 per cent., which we would have accepted, but with a proposal that repairs and maintenance of domestic appliances should bear an extra tax impost of 25 per cent. We regard this as totally unacceptable. It shows the utter nonsense of this higher rate of tax. I ask my right hon. and hon. Friends to divide in support of the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 131, Noes 150.

Division No. 286.]
AYES
[6.33 p.m.


Arnold, Tom
Gower, Sir Raymond (Barry)
Mitchell, David (Basingstoke)


Bain, Mrs Margaret
Grant, Anthony (Harrow C)
Moate, Roger


Beith, A. J.
Grieve, Percy
Monro, Hector


Bennett, Sir Frederic (Torbay)
Griffiths, Eldon
More, Jasper (Ludlow)


Benyon, W.
Grimond, Rt Hon J.
Morgan, Geraint


Berry, Hon Anthony
Hamilton, Michael (Salisbury)
Morrison, Charles (Devizes)


Biffen, John
Hannam, John
Morrison, Hon Peter (Chester)


Boscawen, Hon Robert
Harvie Anderson, Rt Hon Miss
Nelson, Anthony


Bottomley, Peter
Havers, Sir Michael
Neubert, Michael


Brotherton, Michael
Hawkins, Paul
Newton, Tony


Bryan, Sir Paul
Higgins, Terence L.
Nott, John


Bulmer, Esmond
Howe, Rt Hon Sir Geoffrey
Page, Rt Hon R. Graham (Crosby)


Carlisle, Mark
Howell, David (Guildford)
Parkinson, Cecil


Carr, Rt Hon Robert
Irvine, Bryant Godman (Rye)
Penhallgon, David


Chalker, Mrs Lynda
Jenkin, Rt Hon P. (Wanst'd&amp;W'df'd)
Percival, Ian


Clark, William (Croydon S)
Kershaw, Anthony
Peyton, Rt Hon John


Cockcrott, John
King, Evelyn (South Dorset)
Pym, Rt Hon Francis


Cope, John
Kirk, Peter
Rathbone, Tim


Cordle, John H.
Knight, Mrs Jill
Rawlinson, Rt Hon Sir Peter


Corrie, John
Knox, David
Rees-Davies, W. R.


Costain, A. P.
Langford-Holt, Sir John
Reid, George


Crawford, Douglas
Latham, Michael (Melton)
Ridley, Hon Nicholas


Crowder, F. P.
Lawrence, Ivan
Rippon, Rt Hon Geoffrey


Dean, Paul (N Somerset)
Lawson, Nigel
Ross, Stephen (Isle of Wight)


Drayson, Burnaby
Le Merchant, Spencer
Rossi, Hugh (Hornsey)


Durant, Tony
Lewis, Kenneth (Rutland)
Sainsbury, Tim


Dykes, Hugh
Luce, Richard
Shaw, Giles (Pudsey)


Edwards, Nicholas (Pembroke)
MacCormick, Iain
Shelton, William (Streatham)


Emery, Peter
McCrindle, Robert
Sinclair, Sir George


Eyre, Reginald
Macfarlane, Neil
Smith, Dudley (Warwick)


Fairgrieve, Russell
MacGregor, John
Speed, Keith


Fell, Anthony
Marshall, Michael (Arundel)
Spicer, Jim (W Dorset)


Fisher, Sir Nigel
Marten, Neil
Stanbrook, Ivor


Fletcher-Cooke, Charles
Mather, Carol
Stewart, Donald (Western Isles)


Fraser, Rt Hon H. (Stafford &amp; St)
Maudling, Rt Hon Reginald
Stewart, Ian (Hitchin)


Fry, Peter
Maxwell-Hyslop, Robin
Stradling Thomas, J.


Gardiner, George (Reigate)
Mayhew, Patrick
Tebbit, Norman


Goodlad, Alastair
Meyer, Sir Anthony
Temple-Morris, Peter


Gorst, John
Miller, Hal (Bromsgrove)
Thompson, George




Townsend, Cyril D.
Warren, Kenneth
Wood, Rt Hon Richard


Trotter, Neville
Watt, Hamish
Young, Sir G. (Ealing, Acton)


Tugendhat, Christopher
Weatherill, Bernard



Wakeham, John
Wiggin, Jerry
TELLERS FOR THE AYES:


Walker, Rt Hon P. (Worcester)
Wilson, Gordon (Dundee E)
Mr. John Pardoe and


Wall, Patrick
Winterton, Nicholas
Mr. Cyril Smith.




NOES


Anderson, Donald
Hamilton, James (Bothwell)
Richardson, Miss Jo


Atkins, Ronald (Preston N)
Hamilton, W. W. (Central Fife)
Roberts, Gwilym (Cannock)


Atkinson, Norman
Hardy, Peter
Roderick, Caerwyn


Barnett, Guy (Greenwich)
Harper, Joseph
Rodgers, George (Chorley)


Barnett, Rt Hon Joel (Heywood)
Harrison, Walter (Wakefield)
Rooker, J. W.


Bates, Alf
Hatton, Frank
Roper, John


Boardman, H.
Hayman, Mrs Helene
Ryman, John


Booth, Albert
Horam, John
Sandelson, Neville


Bottomley, Rt Hon Arthur
Hughes, Rt Hon C. (Anglesey)
Sheldon, Robert (Ashton-u-Lyne)


Bradley, Tom
Hughes, Mark (Durham)
Short, Rt Hon E. (Newcastle C)


Brown, Hugh D. (Provan)
Irving, Rt Hon S. (Dartford)
Short, Mrs Renée (Woly NE)


Butler, Mrs Joyce (Wood Green)
Jackson, Miss Margaret (Lincoln)
Silkin, Rt Hon John (Deptford)


Callaghan, Jim (Middleton &amp; P)
Janner, Greville
Silkin, Rt Hon S. C. (Dulwich)


Campbell, Ian
Jay, Rt Hon Douglas
Silverman, Julius


Canavan, Dennis
Jenkins, Hugh (Putney)
Skinner, Dennis


Cartwright, John
Jenkins, Rt Hon Roy (Stechford)
Small, William


Castle, Rt Hon Barbara
Johnson, James (Hull West)
Smith, John (N Lanarkshire)


Clemitson, Ivor
Jones, Dan (Burnley)
Spearing, Nigel


Cocks, Michael (Bristol S)
Kaufman, Gerald
Spriggs, Leslie


Cohen, Stanley
Kelley, Richard
Stallard, A. W.


Corbett, Robin
Kilroy-Silk, Robert
Stanbrook, Ivor


Cox, Thomas (Tooting)
Lamborn, Harry
Stewart, Rt Hon M. (Fulham)


Craigen, J. M. (Maryhill)
Lewis, Arthur (Newham N)
Summerskill, Hon Dr Shirley


Cryer, Bob
Litterick, Tom
Taylor, Mrs Ann (Bolton W)


Cunningham, G. (Islington S)
Luard, Evan
Thomas, Mike (Newcastle E)


Cunningham, Dr J. (Whiteh)
Lyons, Edward (Bradford W)
Thomas, Ron (Bristol NW)


Dalyell, Tarn
McCusker, H.
Tierney, Sydney


Davidson, Arthur
MacFarqunar, Roderick
Tinn, James


Davies, Denzil (Llanelli)
Mackenzie, Gregor
Tuck, Raphael


Deakins, Eric
McMillan, Tom (Glasgow C)
Urwin, T. W.


Dormand, J. D.
Madden, Max
Walden, Briar (B'ham, L'dyw'd)


Dunwoody, Mrs Gwyneth
Magee, Bryan
Walker, Harold (Doncaster)


Eadie, Alex
Marks, Kenneth
Walker, Terry (Kingswood)


Edge, Geoff
Meacher, Michael
Ward, Michael


Ellis, John (Brigg &amp; Scun)
Mellish, Rt Hon Robert
Watkins, David


English, Michael
Mikardo, Ian
Watkinson, John


Evans, Fred (Caerphilly)
Miller, Dr M. S. (E Kilbride)
Weitzman, David


Evans, Ioan (Aberdare)
Molloy, William
Wellbeloved, James


Evans, John (Newton)
Moonman, Eric
White, Frank R. (Bury)


Fernyhough, Rt Hon E.
Morris, Alfred (Wythenshawe)
Whitehead, Phillip


Flannery, Martin
Mulley, Rt Hon Frederick
Williams, Alan (Swansea W)


Foot, Rt Hon Michael
Newens, Stanley
Williams, Rt Hon Shirley (Hertford)


Forrester, John
Noble, Mike
Williams, W. T. (Warrington)


Fowler, Gerald (The Wrekin)
Ogden, Eric
Wilson, Alexander (Hamilton)


Freeson, Reginald
Ovenden, John
Wise, Mrs Audrey


Garrett, John (Norwich S)
Palmer, Arthur
Woodall, Alec


George, Bruce
Pavitt, Laurie
Wrigglesworth, Ian


Gilbert, Dr John
Powell, Rt Hon J. Enoch



Ginsburg, David
Prentice, Rt Hon Reg
TELLERS FOR THE NOES:


Gould, Bryan
Prescott, John
Mr. James A. Dunn and


Graham, Ted
Radice, Giles
Mr. David Stoddart.


Grocott, Bruce

Question accordingly negatived.

Mr. Wiggin: I beg to move Amendment No. 25, in page 86, line 40, at end to insert:
'but excluding radio equipment designed for communication or navigational purposes primarily on radio frequencies designated for maritime or aircraft use'.
The aviation interests are grateful for the concessions announced by the Government in their statement yesterday. This is common sense. I am sorry that those interests should have had to fight for this and to experience worry and concern for a period over this matter. I believe

that the action taken by the Government is quite proper. The only problem that arises is about boats and boat radios, where the concession is limited to those radios that are on fixed distress frequencies.
I am sure that the hon. Gentleman who is to reply will appreciate that a majority of radio sets used in boats for communication purposes are of a specialist nature. They are frequently on the very high frequency range for voice communication operating under licence from the telecommunication authority of the country concerned, in our case the Post Office.


Of a set number of frequencies, sometimes 12 or 16, and in expensive radio sets very large numbers of frequencies, there are always one or two that are fixed on distress frequences, the others being for perfectly ordinary communication purposes.
6.45 p.m.
It strikes us on this side of the House that common sense would say that the ability to communicate with a local harbour authority, with other boats or the Coastguard, would lead to a vast improvement in safety, and that the use of the fixed distress channels should be confined to real, full-scale emergencies. And how often these emergencies can and should be avoided by the use of other frequencies that might be available.
The Financial Secretary may reply by saying that in this respect the difference between aircraft and boats is that aircraft are required statutorily to carry this equipment whereas boats are not; but the radio sets which are used in boats are licensed by the Post Office and manufactured to a certain standard. They are not the kind of thing that can be bought off the shelf in any shop and carried home at the end of a day's sailing. They are specifically and solely used in navigation and for the safety of vessels.
I hope, therefore, that before the order is printed the Minister may see fit to look again at this point. It would scarcely mean any real loss of revenue, but I believe it would enhance safety at sea, and lead to a reduction in fatalities and accidents. Safety at sea is something we shall be pursuing in a later amendment. Since the Treasury has so clearly accepted the basic principle of our argument in the way it has treated radios for aeroplanes, I hope it will see fit to give similar concessions across the board for boats.

Mr. Monro: I want to add but a very few words to those of my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who has put his amendment with such clarity. I agree that the concessions made by the Government for aircraft are certainly very beneficial, but the Government are only making a concession about something that should not have been there in the first place.
I would emphasise the importance of safety at sea in relation to marine trans-

mitters and receivers. I am sure the Financial Secretary would agree that to try to prevent disasters and accidents it is important, if possible, to receive meteorological forecasts, gale warnings, and even advice from the Coastguard or others. Having a receiver on board may well go a long way towards preventing even the launching of a lifeboat, let alone the worst eventuality.
The concession that would be made by this amendment, and the inclusion of transmitters and receivers in these provisions, would have only very small financial results for the revenue. This is something which the hon. Gentleman should look at again, and I add my support for this amendment.

Mr. Robert Sheldon: The hon. Members for Weston-super-Mare (Mr. Wiggin) and Dumfries (Mr Monro) welcomed the announcement that an order is to be made with effect from 11th August that radio-communications equipment and radio-navigational aids of the kind used solely on aircraft, provided they meet the approved standards for such equipment, which are laid down by the Civil Aviation Authority, as well as marine radio equipment operating solely on any of, he recognised maritime distress frequencies, will be relieved of the extra tax. I thank them for their comments on that.
I am now asked to go further. The hon. Member for Weston-super-Mare was right about the main reason why the Government have not found it possible to accept the amendment—on the ground of a comparison between marine and aircraft use of radio equipment. As he said, the main reason is that it is mandatory for much of the radio equipment to be in aircraft. It would be wrong if we insisted on certain equipment being carried and then taxed it at 25 per cent. That is a justifiable reason for the concession we propose.
The same argument does not apply to safety at sea and the problems associated with it. Any one who knows the hazards of voyaging at sea is aware of the great importance of safety, though the voyaging be undertaken for sport or amusement, but at least those who can afford to indulge in it would be unlikely to be deterred by the modest increase in cost resulting from the increase in VAT. However, I do not base the argument on


that. I merely mention it to show the reality of the situation.
The radio equipment used in boats is not usually of such a highly specialised nature as that used in aircraft. Many other items of equipment are used for recreational purposes as well. That is right, because that is in accordance with the requirements of those who engage in such leisure activities, but it means that one cannot establish a borderline, and, therefore, a concession has not been possible. However, I hope that our appreciation of the problems to which the hon. Gentleman referred in Committee will be understood and welcomed by the House.

Mr. Wiggin: I find the Minister's arguments increasingly hard to understand, although I do not wish to belittle the further concession. The hon. Gentleman has rightly agreed that compasses and echo-sounders shall bear the lower rate. They are aids to safety.
The definition of radio sets could be left to Customs and Excise. My hon. Friend the Member for Dumfries (Mr. Monro) and I are not prepared to squabble across the Floor of the House about the precise definition. If the Minister removed the word "distress" from his specification, he would largely meet our point. Perhaps Customs and Excise could specify that the sets should be fixed to the boats so that they could not be taken home and used for entertainment purposes, though a 155-channel VHF set is scarcely likely to be used for entertainment purposes.
The Minister should again listen carefully to the detailed arguments of the industry. In the hope that he is prepared to do so, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. MacGregor: I beg to move Amendment No. 30, in page 87, line 25, at end insert:
'(4A) On and after 1st August 1975 item 1 shall not include any television set which was, and so long as it remains, supplied under a contract of hire entered into prior to 16th April 1975'.

Mr. Speaker: With this amendment we are to discuss the following amendments:

No. 27, in page 87, line 17, at end insert:

'but do not include any television sets supplied on hire pursuant to a contract the period of which began before 16th April 1975'.

No. 28, in page 87, line 19, at end insert:
'but do not include any television sets supplied on hire'.

No. 29, in page 87, line 19, at end insert:
'but do not include any television sets supplied on hire for a period beginning before 1st May 1975'.

Mr. MacGregor: We had a brief debate on the television rental situation late one night on the Floor of the House in Committee, and then had extensive debates in Standing Committee. It is right to make one last attempt to make the Government see the justice of our case. There is on the Order Paper an Early Day Motion in the name of well over 70 hon. Members, including many Labour Members. Most of those Members were unable to take part in the Standing Committee debates. This debate gives them an opportunity to make their feelings on the issue felt.
It is inevitable that we shall rehearse some of the arguments advanced in Standing Committee, where we dealt with television sets and rentals as a whole and contracts in force before 1st May. In this group of amendments we return to the one point of existing contracts. We have now changed 1st May to 16th April, for a reason that I shall explain.
I prefer Amendment No. 30, because it refers to an 8 per cent. rate being applied to television rentals
On and after 1st August 1975".
The reason is to prevent a large number of repayments for the period from 1st May, complicating the life of both the Customs and Excise and the retail industry.
When the amendment was tabled I did not appreciate that the Government would make their new orders, on the concessions that they are giving, apply from 11th August. If we also had had the date of 11th August we should at least have been consistent, but our intention is the same as the Government's.
We have changed to 16th April to deal with the point that the Budget Statement was made on 15th April, and people who had contracts before then could not have


known that the Government were about to impose a 25 per cent. VAT on those contracts. The first reason for pressing the amendment is the unfairness to millions of people who had contracts before 16th April, and the hardship to some.
We are not talking about the better-off. They were able to buy their television sets before the Budget Statement, or in the period between the statement and 1st May, or they could have rented for a year or more ahead at the 8 per cent. VAT instead of the 25 per cent. that everyone else is having to suffer. In this debate we are concerned mainly with the poorer sections of the community.
Like practically every other hon. Member I have received shoals of letters from all over the country from people who have little discretionary spending left, for some of whom the television is a lifeline and for many of whom it is their only pleasure. I think particularly of pensioners. A number of those letters were mentioned in Standing Committee. They told genuine stories of pensioners who had, alas, to conclude that the only way to eke out their income was to give up their television because of the increased rental.
7.0 p.m.
The Government's new economic policy had not been announced when we were having our Standing Committee debates. We now face in the year ahead an absolute ceiling on income increases of £6 a week, which for many people means £4 a week net, with substantial increases in the cost of living. Therefore, this extra burden on the television rental is serious. I recognise that in the case of colour television it is between £1·20 and £1·45 a month and in the case of black and white television it is less than 50p. Nevertheless to the many people who have written to us saying that they are having to give up their television rentals and the pleasure of television that is a significant sum.
It has been recognised as being significant in other countries. On 12th June, in a Written Answer, the then Financial Secretary gave the rate of VAT which applies to rental television sets in most of the EEC countries. In no country is the rate anywhere near 25 per cent. The highest is in France where it is 20

per cent. In Belgium it is 18 per cent., in Denmark 15 per cent., and so on down to Ireland where the rate is 6·75 per cent.
The Irish position is particularly interesting. Perhaps I may have the Financial Secretary's attention for a moment, because this is a new point which has not been put in any of the debates so far. I understand that in Ireland there is a rather different although complex arrangement for dealing with rentals for television sets. The purpose of this was to keep down VAT for the millions of people who did not have substantial incomes and who had always taken out rentals. I know that the industry is still divided on the merits or otherwise, as I imagine the Government will be, of the Irish system. It is for that reason among others that we have not sought to table an amendment at this stage to adopt the Irish system. However, the intention of the Irish system seems a sensible one and I hope that the Financial Secretary will look at it with the industry.
There are 12 million people in this country who have existing rentals and it is the aspect of unfairness that is the reason for the amendment. There is an element of retrospection in what the Chancellor has done in seeking a variation of existing contracts. In many cases contracts have run for five, six, seven, or eight years, and the people who took out those contracts understood at the time that there would be a steady decline year by year in the rentals they would have to pay. In many cases they have found that the rentals have increased. One of the main reasons for the increase has been the steep rise in the rate of VAT, from 8 per cent. to 25 per cent. Thousands of people simply do not understand why suddenly their weekly rental has risen in this way. They took out the contract as one would take out a contract to purchase a television set. At a much later stage suddenly to impose fresh VAT is discriminatory and retrospective. It certainly looks discriminatory as against people who were able to buy their television sets.
There is another aspect of unfairness in hitting renters more than purchasers. There is one element in the rental charge which does not apply in the case of purchasers, namely, the cost of the capital or the interest charged on the rental. The 25 per cent. VAT is being put not only


on the original purchase price of the set which the rental company has to bear, on the profit of the rental company and on the maintenance and service charges, which are included in the weekly rental charges—all of which applies to sales—but in addition it is put on the interest charge. If someone were fortunate enough to buy a television set but financed it through a bank loan, which is in many ways the equivalent of a rental, he would find that he did not have the 25 per cent. applied to the interest on the bank loan. Similarly, if he did it through hire purchase the 25 per cent. would not be applied to the hire-purchase charge. Therefore, it is only on interest charged in the case of rentals that the new 25 per cent. rate is applied.
In Belgium an attempt has been made to recognise this precise point because in that country a 25 per cent. rate of VAT on sales of television sets is imposed but on rentals the rate is 18 per cent. I understand that this has been done precisely to take into account the interest element.
In reply to this argument about the unfairness towards rentals, in Committee the Financial Secretary said that he could not make an exception of television rentals otherwise he would have to extend that exception elsewhere and there would then be, in some sense, an incentive to people not to buy other goods but to rent them. That is not a powerful argument, because we know perfectly well that the concession applies only to television sets and not to other forms of rental. I do not want to press this point, because one of the difficulties of following the Belgium precedent would be to complicate the VAT system even more by introducing yet another rate, and that is something I wish to avoid. However, it points out the additional unfairness of applying the 25 per cent. rate of VAT to existing rentals which were previously incurring tine 8 per cent. rate.
My final argument does not relate solely to existing rentals, although the extra 25 per cent. on existing rentals has had a major impact. I want to deal with the effect on the television industry. It goes without saying that the increase to 25 per cent. will have a significant effect on the turnover of retailers who concen-

trate mainly on television and radio and who have large rental businesses. There are certainly fears of big redundancies on the retail side.
I want to concentrate on the manufacturers of television sets because there the implication is not quite so clear. The rental companies are by far the biggest customers of the manufacturers of television sets. At this time of year—the summer season is normally the off-peak season—there is a custom for retailers, particularly rental companies, to take sets from manufacturers through forward-buying schemes. It has become clear this summer that these forward-buying schemes are not taking place. One reason for this is without doubt that more sets are being taken back by the rental companies and rental retailers than are going out to new customers. This means that there are many sets, especially colour television sets, on the shelves. Naturally the rental companies are considerably reducing their orders to the manufacturers. This is leaving the manufacturers with large stocks which they will have to finance at high interest charges. In the last three months the reduction in the number of orders, for colour television sets place with manufacturers—which they attribute to the 25 per cent. rate of VAT —has been about £130,000.
In the electronics industry as a whole, of which television is a major part, there have in recent months been 11,000 redundancies. It is feared that this figure will rise to 20,000 by the end of the year. In many parts of the country where these manufacturers are concentrated—for example, South Wales, Norfolk, Bradford and other areas—and from which I have received representations, these redundancies are being forecast; they may even have begun. This major employment effect can be traced back to television rentals.
I am also worried about the future of the industry. It has been a matter of regret to me that such a large proportion of our home sales of television sets has been of overseas products, either as complete sets or as components. I fear that when the next boom comes—if there is one—there will be a more significant import factor in sales of television sets, especially colour sets.
The home industry is particularly concerned about this. The loss of the home


base which it is now experiencing will not be compensated by the exports which can be achieved at present. Therefore it is afraid that when the next large increase in television sales comes, it will not be in a position to take as much advantage of it as overseas suppliers will be able to do. The Japanese have a vast industry and are able to switch markets more freely than our own much smaller home industry. I am told that one major manufacturer who invested £17 million in new technology to manufacture envelopes for cathode ray tubes to fend off Japanese imports is now accepting that that investment will have to be written off. Regrettably, therefore, because of the constant chopping and changing of tax rates, we shall find that next time round, when the big increase in sales comes, yet another home industry will not be in a position to compete with overseas competitors even in our own home market.
Those are the many powerful reasons, not all of which have been advanced previously, which lead me to believe that the amendment is desirable. I hope that even at this late stage the government can give us some comfort in this matter.

Mr. Robert Kilroy-Silk: I find myself in the invidious and somewhat uncomfortable position of having to endorse virtually everything that was said by the hon. Member for Norfolk, South (Mr. MacGregor). I rise to speak in support of Amendment No. 28, but with great regret, given that it is in the names of hon. Members of the Liberal Party, none of whom is present in the Chamber while this series of amendments is being debated. They have expressed their concern about this proposal, as have hon. Members on both sides of the House, yet their concern for people who rent television sets seems to go no further than putting down publicity-seeking motions. Certainly none of them is present to press their case tonight.
Nor can I support the official Conservative Opposition's amendment, which would seem to divide the country into two nations, in the sense that it would mean—although I am open to correction —that those who had entered into certain rental commitments by a certain date would be exempt and those entering into rental commitments afterwards would not

be exempt. That would be socially divisive and unnecessary. I should like, therefore, to support Amendment No. 28, in the names of Liberal Members.
It is with great regret that I find myself having to make this speech. I had hoped that, after the debate on Second Reading, the Government would have considered the various heartfelt pleas made on both sides of the House and taken them into account in Committee. The tax on rentals will hit hardest those on the lowest incomes and particularly the poorest families, the families whom, I understood, I was sent here to represent and to look after.
These are not people who can afford to buy their television sets outright and who would, therefore, in many circumstances, as the law stands as a result of the Government's proposals in this measure, have evaded the increase in VAT from 8 per cent. to 25 per cent. Again, many of these people are not able to pay their television rental payments well in advance. I would accept that many people who rent televisions are not of the poorest categories and not on very low incomes. Nevertheless, many were able to rush in after the announcement and pay instalments for six months in advance and so avoid the new penalty of the higher rate of tax. That option was not open to the vast majority of my constituents, who are on low incomes.
Again we seem to have a situation in which, for one reason or another, the Government hit our people hardest by their measures. The way in which the Chancellor has consistently shown a lack of sensitivity to the real problems of working-class families and their pressures and difficulties in meeting taxes is extraordinary.
This is not merely a question of working-class families who are in employment who are hit by the higher rate of VAT. It also hits the pensioners, the housebound and the disabled, for many of whom the television is in a real sense their only communication with the outside world, and who rely upon it for companionship because they have little else of companionship and company to which to turn. To enact, as is proposed, a much higher, punitive rate of tax on their single and only pleasure seems to be unnecessary and regrettable.
However, there is also a much wider aspect to this matter than simply the effect it has upon so many members of our community, particularly those on low incomes. There is also the serious consequence for employment prospects. This was pointed out by the hon. Member for Norfolk, South. In the constituency adjoining mine, represented by my hon. Friend the Member for St. Helen's (Mr. Spriggs), there is a threat currently hanging over the heads of 750 men who work at the Ravenshead glass factory, which is owned by Pilkingtons and is engaged in the manufacture of television tubes. Those men are to be made redundant next week because of the effects of Japanese competition, because they can no longer compete in that commodity.
7.15 p.m.
That is a separate problem, but it seems insensitive, to say the least, that the Government should then come along and, as it were, add to their problems by metaphorically kicking them in the teeth and saying "Yes, all right, you are suffering from foreign competition, we know, but we shall add to that by further increasing the problems for your industry and reducing the potential demand for television sets and tubes by increasing the rate of tax from 8 per cent. to 25 per cent." That will have a spin-off not merely in the industry concerned with the manufacture of televisions and components but throughout the economy as a whole.
Again, as the hon. Member for Norfolk, South pointed out, many of the people who rent television sets have already paid purchase tax on those televisions and now they are to be taxed again by a double and almost retrospective tax, which seems to be insensitive and unnecessary.
I do not object in principle to the Government raising extra revenue by means of taxation or by taxing certain commodities. I know that the Chancellor does not regard television as a luxury, and it is not for most people, but television sets are essential for certain members of the community, such as the disabled, the housebound and pensioners. Therefore, I wanted to speak on this issue. Having done so I should like to say, with deep regret, that I cannot find myself able to support my Government in the Lobby on this issue.

Mr. Sydney Tierney: I apologise for being absent from the Chamber at the beginning of the debate. I was confined in a Standing Committee.
Many of my hon. Friends have expressed their unhappiness about the clause. This was registered in an Early-Day Motion, which carried a good number of names of Labour Members. I am sure that most Members of Parliament have had correspondence and representations regarding the effect of the clause. I want to speak specifically to Amendment No. 30.
Under the clause, all television rental payments, whether or not the agreement was entered into or the set installed before 1st May 1975, will attract the new 25 per cent. VAT rate. There are 12 million television renters in Britain. A great proportion of them would have no television if they could not hire a set in this way. A great number of these sets are hired by retired people and those others mentioned by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). This much higher burden of taxation discriminates against them and is unfair compared with those who choose to purchase and can afford to purchase a set or acquire a set by hire purchase. It hits particularly the less well-to-do.
The effect of the clause is inequitable as regards those who were renters on and prior to 30th April 1975. I give a simple, straightforward, factual example. Those who bought a television set on 30th April paid 8 per cent. VAT and not 25 per cent. Those who rented a set on 30th April, the same day, and agreed by contract to pay 8 per cent. VAT now have to pay 25 per cent. VAT.
My main objection to the clause lies in the inequality of treatment between purchasers and renters. Many rental agreements have been in existence for some years and a considerable proportion of the sets have already attracted purchase tax. The rental paid by television subscribers has three elements—the purchase of the set, interest on finance for the purchase, and servicing. I do not think anybody would argue that the servicing element should not attract VAT because other forms of maintenance, like car servicing, attract the tax. However, that does not justify the remaining elements of the rental being taxed at the higher


rate on existing agreements. This must be the first case of payments of interest attracting VAT.
I do not suppose there has ever been a Finance Bill that did not ride roughshod over some section of the community, and one appreciates the pressures on the Treasury to put into effect these measures, and I understand why this is done. I understand Ministers' desire to get the Bill through more or less intact. It may be said that the increase is not high. Figures of 8p a week for black and white sets and 25p a week for colour televisions have been quoted, but this tax is not like the tax on beer or cigarettes. People cannot cut down their consumption and save money. Contracts are made, and payments made now or in the future are already contracted in full. People cannot cut their suits according to their cloth. If they cannot afford the increased payments, their only option is to hand back the set to the dealer. I know a number of hon. Members have received letters from constituents, and other letters have been passed on by the television rentals companies, from people who have had to do just that.
It is inequitable that the 25 per cent. rate should apply to all contracts before 16th April. I received from a constituent a letter that was reprinted in the local paper under the heading: "We have been fiddled." I agree with her.

Mr. J. Enoch Powell: I dare say that the few observations I propose to make will in due course be made from the Dispatch Box by the Financial Secretary. I shall be disappointed in him if they are not. This may be one of those cases in which it is right that it should not be left solely to the Minister to make some of the more obvious points.
Many of us hope that the day will soon come when the relatively very high rate of VAT on a number of items will be reduced and we shall once again have 10 per cent. VAT applying to television sets and rentals. I assume that hon. Members who will support this amendment will also argue, when that reduction occurs, that the 25 per cent. rate should continue to be paid on current rentals until they run out. If one has it at one end of the process, one must have it at the other end.
We have an historical example. When representations were made to me on this subject, I inquired of some of those who made them whether they had made such representations previously when the rate was reduced from 10 per cent. to 8 per cent., when the reduction, contrary to all these arguments, was applied to current contracts. I was informed that no such representations had been made. So this is not the first time in the last 12 or 18 months that this issue has arisen.
No doubt the Financial Secretary will confirm that when VAT was first introduced and necessarily applied not only to the purchase of sets but also to renting—and it is obvious that if it is to apply to one, it must be for the sake of non-avoidance apply to the other—exactly the same rule as the schedule proposes was applied. So I am sure that the official Opposition, used though they are to U-turns and repeated U-turns, will not be carrying this amendment to a Division.
The Financial Secretary should be supported if it is his intention to maintain that we are dealing here with a continuous supply of a service and that the incidence of a change of VAT must arise if the service continues to be supplied. There is in the long run no inequity unless hon. Members sustain the case that VAT rates are destined continuously to increase. That is a point of view which I hope neither side will sustain. I believe that the Financial Secretary will be right if he resists the amendments.

Mr. Max Madden: Contributions by the right hon. Member for Down, South (Mr. Powell) are always of interest, but I am surprised that he made no reference to the fact that the amendment we are discussing comes about as a consequence of our membership of the Common Market. This tax would not be with us if we were not members of the EEC.
Finance Ministers are always being exposed to special pleading, but I appeal to them to take special note of the pleas being made in this amendment. Ministers should be vigorously reminded that television today is not a luxury for many people. In a rural area like my constituency, it is a necessity. For many people, it is their only form of company, communication and entertainment. It should be regarded in a very special way.
There is a superficial attraction in Amendment No. 30, but this would create two distinct categories of people—those with existing agreements who would be exempt from the increase and those with new contracts who would have to bear the increase.
At Question Time today we were reminded of the difficulties which that sort of situation creates. The first Question on the Order Paper dealt with concessionary television licences awarded to elderly people living in a particular type of accommodaton. Many others, among them the most needy, do not receive concessionary licences. For that reason, the philosophy of Amendment No. 30 should be resisted. It would create even greater unfairness and bitterness.
I intend to support the logic of Amendment No. 28. I am sure that, in his reply, the Financial Secretary will remind us that, if all hired television sets were relieved of VAT, the cost would be enormous. I am advised it would be about £100 million. I am advised that it is technically possible for the television rental companies to absorb the charge. A very limited number have done so, but the vast majority have not, and I am sure that they will continue to say that it is impossible in the present economic situation for them to absorb these charges. That situation will probably continue, and I am, therefore, again drawn to argue that we should support Amendment 28. If the Government want to know where to get the revenue, we should tell them, not for the first time. that they should reduce defence expenditure, reduce expenditure on roads and change the corporation tax. I offer three possibilities to enable them to meet our wishes.
This is a social issue on which social justice should apply. We should alter our priorities and relieve all television rentals of any VAT charge. If we still need to find additional revenue, the Exchequer should find it in the ways I have recommended.

7.30 p.m.

Mr. Newton: The House will not expect me to endorse every word uttered by the hon. Member for Sowerby (Mr. Madden), but in general I support his sentiments. It is a pleasure to have heard vigorous speeches on the subject

from the Labour benches in view of the utterly supine attitude Labour Members adopted in Committee. Two of them have signed the Early-Day Motion, but neither uttered a word or gave any sign of supporting our attempt to do something about the matter.

Mr. John Ryman: What does "supine" mean?

Mr. Newton: I meant that they laid very low indeed and showed no sign of activity, and, as I understand it, that is, broadly speaking the meaning of the word "supine", although I do not have a dictionary with me and I cannot give a precise definition. Whatever we may argue about the meaning of the word, I can tell the hon. Member that his hon. Friends did absolutely nothing in Committee. It is a pleasure, therefore, that some Labour Members have taken the trouble now to speak out.
I have an interest to declare in the matter in that I rent a colour television set under a contract extravagantly entered into by my wife. We paid a year's rental in advance, so we are not affected at this moment, although, clearly we shall be at the end of the year. In that sense I have a financial interest which I suppose I should declare in view of our increasing sensitivity in these matters.
Running through the speeches of all hon. Members has been the point that Conservatives have sought to m0ake throughout the debates on the schedule, which is the absolute nonsense of pretending that the 25 per cent. rate is in some way a tax on luxuries or less essential goods or a tax on the better off. This is merely one example, perhaps a classic one, which shows that the 25 per cent. rate is hitting the less well off, those least well able to defend themselves and those who already have fewest possessions in the affluent society. This totally undermines anything the Financial Secretary may wish to say about the need to raise revenue. The figure in question probably is £100 million, if I recall correctly what we were told in Standing Committee. However, if the hon. Gentleman even begins to accept the argument his hon. Friends have been advancing, which I endorse, that this tax is hitting the least well off, surely he cannot say that it is essential in the present economic situation to take £100 million of extra


tax from the poorer sections of our community. Surely he is not saying that there is no other way of raising this revenue. Would it not be preferable to have a 10 per cent. flat rate, spreading the burden evenly across the board, because that is the alternative in practice? If the Financial Secretary stands on his revenue argument, unless he is prepared to say that the higher rate does not hit the less well off he is admitting that he must take £100 million from the least well off to solve the country's problems.
We then come to the question of employment. With the 25 per cent, date we are witnessing a return to one of the discredited fiscal expedients of the 1960s, a method which is now widely acknowledged to have done enormous harm to some of our main industries. It consisted of singling out important consumer industries and putting a tax on their products because a lot of revenue could be raised by subjecting them to a specially harsh treatment. Very few hon. Members would challenge the view that the way in which the motor car industry was treated, with these occasional huge surges in taxation during the 1950s and 1960s, is one reason why it is in its present mess. Nevertheless, that is exactly the policy the Government are adopting in respect of television sets, washing machines, refrigerators and all the rest.
The same mistake is being made, and we shall pay the price when the next expansion comes. Then we shall find that our domestic industry has not made the investment and is not in the position to meet the demand, and a flood of foreign goods—cars, television sets and so on—will come in. The Financial Secretary has argued that we cannot separate the overall effects of the depressed state of the economy from the effects of this tax. I accept that that would involve a long, complicated and difficult statistical job, and people might not accept the results when it was completed. It does not follow, however, that it does not matter if tax rates are put up. His argument is that the industry is in difficulties anyway and there is no certainty that the increased tax is adding to those difficulties. He must realise, however, that one cannot hit an industry which is on its knees on the head

and push it on the floor, because that is what he is doing with the tax.

Mr. Mike Noble: The hon. Member is concerned about employment prospects, and has mentioned the effects of the tax on the recession. Will he say something about the control of imports of television tubes as a means of protecting employment?

Mr. Newton: That is not a policy I would support. Protectionist policies in the end do not strengthen our industries. They must be given a stronger market and encouraged to invest and build up for the future. It is against that situation that the tax militates.
The right hon. Member for Down, South (Mr. Powell) advanced a logical argument. In a world which operated in a perfect and logical way no one could deny the force of the points he made. He fails to realise that we are not in a world of perfect logic. Above all, this is such a large tax increase that it has created a bitter sense of injustice among many people about the way our tax system works. That is damaging to the tax system, to the Government, which I do not mind, and to our political system, which I do. There are large numbers of people who cannot accept that this should have been done to them. They thought they had signed agreements to pay a certain price for the supply of something. They do not understand, and think it unfair that the Government should say in April or May "No", whatever you thought, we are changing the price. We are putting the price up by an Act of Parliament, backed by the full machinery of the law." They may be right or wrong to feel as they do. There is a logical argument about how our tax system works. However, there is a burning sense of injustice about this matter. It is difficult to defend the political and parliamentary system when it treats ordinary people in this way. It cannot be good for Parliament to create such a situation
Part of the Government exercise is to reduce people's expenditure on television. That means reverting from colour to black and white television, or giving up a television set. Many of my constituents have written to me about this matter. Home Office policy prevents people from obtaining a refund of television licence fees if they decide to change their colour television for a black and white set, or


give up their television set. According to the correspondence I have had with the Home Office, this policy has been endorsed by the Treasury. Unless people have purchased their licence within 28 days they cannot claim a refund.
Part of the letter which I received from the Minister of State at the Home Office reads:
television licence fees are issue fees and are nowhere expressed as rates per month, per quarter, or for any other period. Vehicle excise licence fees, on the other hand, are expressed as four monthly and annual rates.
That is a fair point, although I would not attach any importance to it as a distinction of any consequence.
The letter continues:
Vehicle excise licence fees, on the other hand, are expressed as four monthly and annual rates. These licences are substantially more costly than television licences, so the proportion of the revenue absorbed by the administrative costs of providing for variable periods of licensing should be less.
That is nonsense. The four-monthly vehicle licence is more costly than the black and white television licence, on which there is no refund. I hope that the Minister will look at this question.
Two of my constituents have complained that, having given up their television sets, they cannot even obtain the money they paid for the use of the television for the rest of the year. The Treasury appears to have endorsed that Home Office policy. I cannot believe that it is right.
The proposed measure will cause unemployment in the industry and create a sense of unfairness and injustice to the less well off. Therefore, I hope that the House will accept this amendment.

7.45 p.m.

Mr. Noble: I support Liberal Amendment No. 28. I notice that a few Liberal Members have now arrived to speak to it.
The Budget strategy is one of outdated demand management without the associated measures required to bring stability to the economy. Having made many speeches on textile and footwear, I am now pleased to speak on behalf of another industry in my constituency. The only growth industry, in modern technological terms, in my constituency produces television components. Some of the constituents of my right hon. Friend

the Member for Heywood and Royton (Mr. Barnett) work at that factory.
This section of the Finance Bill will cause indignation among the ordinary people whom I represent as a result of the amount they must pay for what they regard as a necessity, not a luxury. Before the Christmas Recess I spoke in the television licencing debate. The point was made then that our old people are indignant at the anomalies caused by the dual system of television licence charges. That is why I cannot support the Conservation amendment, which, if accepted, would create further television hiring anomalies. Many of my elderly constituents recently visited me and complained about the tremendous increase in the charges for their window on the world.
In the debate before the Christmas Recess I produced a petition signed by my constituents complaining about licensing charges. Since then the licence charges and the VAT rate on the hire of sets have increased. As the Government are committed to social justice, to helping the underprivileged and to ensuring that the elderly have a dignified retirement, this proposal is shameful.
I support the Liberal amendment. The Conservative amendments, if passed, will create divisions in our society, while the Government's proposals will create much resentment amongst the majority of our people.
Old people often hire television sets. Many of those sets are reconditioned and have been in service for eight or 10 years. The purchase price of those sets included purchase tax. The sets constantly need repairs and provide only the minimum of service. In my view, it is totally immoral to impose a 25 per cent. VAT rate on the hire charges of those sets.
Many factories producing television components are situated in the assisted areas. There is one in the North-East and there are several in the North-West and in North-East Lancashire. The factory at Simonstone, in the Clitheroe division, is one of the major employers in the area. It also draws its workers from the surrounding areas. It pays good wages, albeit that it operates a 168-hour week. There is a subsidiary factory in my constituency. Recently the employment offered by that factory declined by 300


per cent. When the main factory and its subsidiary came to the area they were hailed as the high spots of new development which would change the image of the traditional footwear-textile-coal mining area into a modern industrial area. We now find that short-time working and unemployment are realities. The measures proposed in the Finance Bill will exacerbate the situation facing my constituents and those of the surrounding areas.
I wish that the Government had not put forward these proposals and that they had recognised that ordinary people, especially the old and the deprived, regard television as essential. On those grounds, I support the Liberal amendment.

Mr. Beith: It is a most interesting experience to have an amendment in the name of myself and my hon. Friends supported by the Labour benches. A short time ago when we debated an amendment which aroused equal controvery and had in some ways a greater element of significance the Labour benches were totally empty. I say this not as a party political gibe, but not one Member of the Labour Party was prepared even to attend, let alone to speak or vote on the argument I was advancing, which was for the exemption of electrical repairs and maintenance from the 25 per cent. rate of VAT. It comes ill from the Labour benches to suggest that there is a shortage of Liberal Members in the House. However, we must not look a gift horse in the mouth. We have an impressive array of Labour Members present, and we shall hope to carry them into the Lobby with us.
The imposition of 25 per cent. VAT on television rentals hits at the section of the community which the Government by their policies proclaim they seek to assist. It is difficult to sustain that view when one examines in detail aspects of the Government's policy such as this one. It appears to be the Government's intention to concentrate increased tax burdens on those most able to afford them, but that is far from the case with this tax. This proposal has the added unpleasant feature of a retrospective element. It imposes additional tax on people who entered into an agreement in the expectation of being able to continue with it at a particular price.
In my constituency this new imposition has to be added to a large number of others. People living in a rural area such as the one I represent have to pay not only rent on a television set and the licence fee but also a relay fee, which is at least as much as the licence fee, because they cannot get a picture from a conventional aerial. To add to that this high rate of VAT on rental is extremely burdensome on people who live in areas where there is no other form of entertainment. I would not go so far as the hon. Member for Rossendale (Mr. Noble) and claim that television is a necessity. We have come to a pretty pass if we have to say that. But it is of great importance and value to old people, the housebound and people who live alone.
In Committee we spent a long time trying to discover the justification for this tax. I suspect that Government supporters may still suppose—not having heard the Financial Secretary's argument —that the tax is a luxury tax. I have news for them. It has been said time and again from the Government Front Bench that it is not a luxury tax. It has a much more subtle purpose, the definition of which is rather elusive. One feature of the items selected for tax is that they are single purchases, which are usually fairly expensive and represent a one-off payment. It is argued that it is, therefore, right to put on them an additional tax burden. That argument manifestly does not apply to television rentals.
The difficulty with which we were confronted in Committee was that we just had this will-o'-the-wisp definition of the tax, and whenever we sought to apply it to any item to which the tax was being applied, the definition was changed and the Government sought another definition. When we claim that a particular item is not a luxury, we are told that the tax is not a luxury tax. We are told that it is a tax on a large single purchase. When we find something to which that definition does not apply, we are told that that is not what the tax is either.
There is no coherent definition of the tax, just a general vague jumble of confused prejudices which do not add up to a sensible basis of distinction between the 8 per cent. and the 25 per cent. levels


of tax. The attempt to apply a consistent logic breaks down yet again on this amendment. I welcome the support that has been given to the amendment by both sides of the House, and I hope that it will be carried.

Mr. Robert Sheldon: I do not intend to go into whether a television set is a necessity. I accept, as some of my hon. Friends pointed out in several valuable contributions, that whether it is a luxury depends upon the way in which it is regarded by the person concerned. For example, people living in remote areas on their own are in a different category from people who have at hand more varied entertainment. What we have to consider is the way in which the tax was introduced.
Perhaps I might be allowed to deal with some of the more detailed aspects which have been mentioned. The hon. Member for Norfolk, South (Mr. MacGregor) asked about VAT in Ireland and wondered whether the method used there might be adopted to handle the taxation of VAT on television rentals. It is extremely difficult to compare with any degree of precision methods of raising tax in various countries. I understand that in Ireland the rate of tax on television is 36¾ per cent. levied at the manufacturing stage. That illustrates how difficult it is to compare the methods used in one country with those used in another.
My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) spoke of the tax on rentals and said that 60 per cent. of all television sets were rented. That point was also mentioned by my hon. Friends the Members for Birmingham, Yardley (Mr. Tierney), Sowerby (Mr. Madden) and Rossendale (Mr. Noble). I understand that this is the method by which a large number of people provide themselves with television sets, but it is not easy to be certain that this method is used only by the less well-off. I run my television set in that way and so, I understand, does my right hon. Friend the Chief Secretary.
We must not assume that this method is applicable only to people with a certain income level. It is clear from the number of rented television sets—12 million—that that is not so. There will,

of course, among that number be many people who rent television sets because they cannot within their budget afford to buy one.
I shall not comment on the advantages, pleasures and usefulness of television. As Members of Parliament we do not have the opportunity to see television very often but we are aware of its importance to the community as a whole and to our constituents.
My hon. Friend the Member for Yardley referred to the distinction between people who purchased television sets on hire-purchase terms and those who rented television sets. We must not forget, however, that people who enter into a hire-purchase arrangement have to pay for repairs and replacements.
As the right hon. Member for Down, South (Mr. Powell) pointed out, we must not assume that VAT will move permanently in an upward direction. VAT is a buoyant tax, which means that there is a limit to the level to which it can go. It is unlike excise duties which are not on a percentage basis and have to be raised regularly. As it is on a percentage basis, my hon. Friends will be able to make a calculation as to the maximum amount that can apply.
Obviously, this is a rate which is fixed by the Chancellor. My right hon. Friend decided that he needed this revenue at this time and he fixed the rate accordingly. Of course, no one would presume to suggest that it is a low rate; it is nothing of the sort. In future, given an improving economic situation, it must be the hope of everyone that the rate will be reduced. That would be a problem for those who wish to produce the arguments that we have heard this evening. They would find that people who had purchased their sets at 25 per cent. would be caught on the dilemma of a reduction in the rate of value added tax. I do no more than draw the attention of the House to that matter. It is not the main argument that I wish to develop.

8.0 p.m.

Mr. Beith: I am puzzled by what the hon. Gentleman has said as regards VAT and excise duty. He seemed to be saying that there is a limit to the rate at which VAT can be applied which we can work out whereas that is not true of excise duty.


Does he mean that or does he mean the opposite?

Mr. Sheldon: Surely the hon. Gentleman will be able to understand that on a percentage basis there is a fixed increase. I assume that no one would wish to go that far. I do not think there is anyone who is that enthusiastic about VAT, although those who introduced the tax saw great advantages which I fail to see. We are suffering from a number of problems because of its introduction. The disadvantages of the tax are obvious and they caused great problems at its introduction.
The particular difficulty with which we are concerned is that VAT applies to services as well as goods. That means that the hiring of goods is a taxable item. That is laid down in the definitions of the Finance Act 1972, under which value added tax was introduced. That means that when a person pays for a month's hiring he is enjoying a taxable supply under the terms of the Act for which VAT will be charged.
The cost of the amendment would be considerable. Before I deal with that matter, however, I turn to what the amendment means for the ordinary person who is renting a television set. My hon. Friend the Member for Rossendale pointed out that social justice demands that consideration should be given to people with eight- or 10-year-old sets who are trying their utmost to maintain a picture in front of them and who face certain difficulties. I well understand that argument. However, it must be remembered that, on the calculations we have made, the extra cost to the ordinary person with a black-and-white set will increase by about 8p a week. A set that is eight or 10 years old will obviously be a black-and-white set. For colour sets the increase will be 20p to 25p a week. That is the extra cost of the VAT increase. I understand that that extra cost is a matter that has to be considered by many people.
It might help to put the matter into perspective. Let us bear in mind that licence fees are £18 a year for colour sets and £8 a year for black-and-white sets. Not so long ago licence fees increased considerably and those who had colour sets were able to make the payments. At this stage I must dispose of the ques-

tion raised by the hon. Member for Braintree (Mr. Newton) about a refund on television licences. I ask him to pursue the matter with my right hon. Friend the Secretary of State for the Home Department, to whom all such representations should be made.
I turn to the problems that would arise if the amendment were to be carried. First, there would be two rates in force. There would be those people who after August would be paying at the rate of 25 per cent. and there would be other people who had entered into contracts before 16th April who would be paying at the rate of 8 per cent. That would be a continuing situation. Over a period there would be a privileged number who would be paying a lower rate of VAT. That number would not grow to any great extent because any change of contract they made would involve them in paying a higher rate of VAT. That situation would exist side by side with the obvious administrative problems as well as the social anomalies which would arise.
Such a situation would not help the problems of the radio industry, a fact which was alluded to by my hon. Friends the Members for Ormskirk and Rossendale. One of the things I have sought to do—it has not been easy to come to grips with this matter—is to try to determine the effect upon the radio and television industry of the increasing of valued added tax. I have met the Radio Industry Council and I have found it difficult to separate out the effect of the increase in VAT from the ordinary seasonal changes. We are moving into the summer period when sales decline, and I find it difficult to separate out the long-term implications. The worsening economic situation obviously produced its problems. They in turn meant that people were less inclined to spend money on new television sets. These factors must be borne in mind as well as the increase in imports. There are a number of factors to be considered and it is not easy to separate out what is due to the increase in VAT.
If the amendment were carried it would mean that a large proportion of the 12 million people would then be paying VAT at 8 per cent. but would have to pay at the rate of 25 per cent. if they were to change their sets. We must not underestimate the effect that that would


have on the production industry. It would mean that the incentive to change sets and to buy new models would be that much reduced, and the consequential drop in sales could be considerable.

Mr. Kilroy-Silk: I am having difficulty in following the logic of my hon. Friend's argument. Is he saying that the increase from 8 per cent. to 25 per cent. will have the precise effect that he has described and will be consequential on the amendment we are discussing?

Mr. Sheldon: I am saying that production would be hit very hard. There would be little incentive for people to change their sets. In fact, there would be a very great disincentive as they moved from paying 8 per cent. on their existing sets to 25 per cent. on their new sets.

Mr. Deputy Speaker (Sir Myer Galpern): I am sorry to have to intervene in the Minister's speech, but for a little while I have been getting a very poor picture from the television set and hardly any sound.

Mr. Sheldon: I shall try to improve the quality, Mr. Deputy Speaker. Th. point I am trying to make is that if people wish to change their sets they will have to pay at the rate of 25 per cent. That would be the position if there was the lower rate of VAT on pre-Budget contracts and they wished to change their set. There would be that discouragement. It would feed back in respect of sales and production in a way which would disturb those who are interested in the manufacturing industry.

Mr. Nigel Lawson (Blaby): Surely the Minister realises that the people about whom we are most concerned could not afford to buy new sets or to change to a television which would be more expensive. Had they been able to do so, they would have taken that step before 1st May because it would have been cheaper.

Mr. Sheldon: The hon. Gentleman will not deny that sales of television sets will continue. If a number of people were paying 8 per cent. and now had to rent a new set at a rate of 25 per cent., that would amount to a disincentive.

Mr. Newton: I am puzzled at the situation. The Financial Secretary is directing most of his arguments to his

Labour colleagues. I had understood that Labour back-benchers supported Amendment No. 28, to which none of these arguments applies.

Mr. Sheldon: I dealt with the hon. Gentleman's argument a little earlier.
Let me seek to show how the amendment would have an impact on the social services and on total costs. My hon. Friend the Member for Rossendale spoke about social justice. I understand the point and it is a matter of great concern to everybody. However, the amendment is no way to achieve some of the social purposes for which we stand and for which we shall continue to fight.
One problem in discussing Finance Bills is that we deal with concessions, but we never discuss ways in which money could most usefully be spent. We look at one side of the accounts and rarely at the other side. We have to ask whether these are the right ways in which to spend money.
We are talking about a very substantial sum indeed. [HON. MEMBERS: "How much?"] The amendment would cost up to £90 million in the first full year; the average length of hiring agreements is between four and five years. It means that the total cost over that period would work out at between £200 million and £250 million. [HON. MEMBERS: "Oh."] I know that some Conservatives may take that figure a little lightly. I am much more concerned about the public sector borrowing requirement and obviously I have a much greater concern on these matters than they have.
These figures of course assume that the length of time that a person keeps a set would remain the same as at present. It can be estimated, however, that such a fiscal advantage would mean that older sets would be retained longer than they are at present.
We have had a number of suggestions as to the way in which we should examine these matters in discussions on the Finance Bill. My hon. Friend the Member for Sowerby referred to social purposes. Perhaps we may have to look at these matters together rather than in isolation. I support any changes in that direction.

Mr. Madden: I welcome the Treasury's approach. I referred in my remarks to the need for concessionary television


licences to be extended to all elderly people regardless of where they lived. In the new enlightened approach from the Treasury, will the Treasury be prepared to support the extension of free television licences?

Mr. Sheldon: This is a matter for the Department of Health and Social Security. I cannot commit my right hon. Friend the Secretary of State for Social Services. We are now talking about the distribution of £200 million to £250 million. I am sure that if my right hon. and hon. Friends had that sum at their disposal in the Department of Health and Social Security they would spend it on the disabled, to relieve unemployment or to assist with other problems. I doubt whether the matter which we are now discussing would be their first priority.
I accept the necessity to bring these matters to the Government's attention. However, if the amendment were to be carried, we must consider the cost.

8.15 p.m.

Mr. Lawson: The Minister inadvertently misled the House when he said that concessionary television licences were a matter for the Department of Health and Social Security. They are a matter for the Home Office. I have been in correspondence with the Home Office and the Minister of State, Home Office has informed me that the cost of half-price television licences to all old-age pensioners would be £15 million. The Financial Secretary should get his figures right.

Mr. Sheldon: I am pleased that the hon. Gentleman gave that figure because it is a useful contribution to the debate. I was not dealing at that point with the figures but was seeking to point out that if these sums of money were available they might well be used in quite different directions. We are concerned with very large sums of money indeed, and in the present economic situation I must ask my hon. Friends to oppose the amendments.

Mr. David Howell: Enough has been said in the last hour or two to show the strong feelings in almost all parts of the House on this matter. The Conservative Party has made its position absolutely clear—namely, that we are in favour of

10 per cent. VAT rather than 25 per cent. VAT. We believe that this would be a better way of securing revenue.
The Financial Secretary said enough to show that he was in an uncomfortable position, and in the end he threw in almost every argument. At the conclusion of his remarks he concentrated on public expenditure. I do not accept, in the way in which the Minister argued the case, that those public expenditure implications were right.
Labour Members have put their case with feeling and sincerity and have been attracted by the simplicity of Amendment No. 28 tabled by the Liberal Party. Amendment No. 30 relates to Early-Day Motion No. 477 on value added tax on television rentals, signed by 78 hon. Members and referring to television rental agreements entered into before Budget Day. I think that those hon. Bembers are right in their proposal in preference to Amendment No. 28. The motion to which they originally put their names makes sense because it deals with the basic injustices of the situation as proposed by the Government.
First, it deals with the inequity as between those who rented before May 1st and those who bought before 1st May. Secondly, it deals with the bewilderment—which my hon. Friend the Member for Braintree (Mr. Newton) described so vividly—of those who thought they had entered into a contract at certain rates over the years and had found that these rates were being adjusted.
Most television rental companies started by charging the VAT at a lower rate, following certain agreements with the Customs and Excise, and were just raising the rates through the years. Most people had entered into a contract under which they were paying weekly or monthly at a certain rate, and were suddenly confronted by the problem created by the 25 per cent. swingeing increase.
I shall not presume to add to all the details of the different arguments made. The Financial Secretary has tried his best. He is in a very awkward position. He has no ground to stand on in this matter. We are rather more concerned than experience would suggest that the Financial Secretary and his colleagues are about the public sector borrowing requirement and the present revenue position. Our


VAT 10 per cent. proposal would look after that.
That is why we feel justified in proposing that Amendment No. 30 be pressed, and why I would urge Labour Members who share our objectives—even if they start from a different point of view—to follow what they have said in their own Early-Day Motions and support us in the Lobby.

Mr. Pardoe: On a point of order. Now that you have heard the debate, Mr. Speaker, may I suggest that there are two distinct principles at stake in Amendments Nos. 28 and 30, which have been discussed widely in the debate, and ask

whether it would be possible to have a vote on Amendment No. 28 as well as Amendment No. 30?

Mr. Deputy Speaker: I am glad that the hon. Member has raised the point. I have given it very careful consideration. I indicated earlier that only if Amendment No. 30 were withdrawn could we have a vote on Amendment No. 28, and I adhere to that decision.

Question put, That the amendment be made:—

The House divided: Ayes 108, Noes 106.

Division No. 287.]
AYES
[8.23 p.m.


Arnold, Tom
Jenkin, Rt Hon P. (Wanst'd&amp;W'df'd)
Rippon, Rt Hon Geoffrey


Atkins, Rt Hon H. (Spelthorne)
Kershaw, Anthony
Roberts, Michael (Cardiff NW)


Bain, Mrs Margaret
King, Evelyn (South Dorset)
Ross, Stephen (Isle of Wight)


Beith, A. J.
Kirk, Peter
Rossi, Hugh (Hornsey)


Benyon, W.
Knox, David
Sainsbury, Tim


Berry, Hon Anthony
Langford-Holt, Sir John
Shaw, Giles (Pudsey)


Biffen, John
Latham, Michael (Melton)
Shelton, William (Streatham)


Bottomley, Peter
Lawrence, Ivan
Silvester, Fred


Brotherton, Michael
Lawson, Nigel
Sims, Roger


Campbell, Ian
Le Marchant, Spencer
Sinclair, Sir George


Carlisle, Mark
Luce, Richard
Smith, Dudley (Warwick)


Chalker, Mrs Lynda
MacCormick, Iain
Speed, Keith


Cockcroft, John
McCrindle, Robert
Spicer, Jim (W Dorset)


Cope, John
Macfarlane, Neil
Stewart, Donald (Western Isles)


Corrie, John
MacGregor, John
Stradling Thomas, J.


Crawford, Douglas
Marten, Neil
Taylor, R. (Croydon NW)


Crowder, F. P.
Maxwell-Hyslop, Robin
Tebbit, Norman


Dean, Paul (N Somerset)
Mayhew, Patrick
Temple-Morris, Peter


Drayson, Burnaby
Meyer, Sir Anthony
Thompson, George


Durant, Tony
Mitchell, David (Basingstoke)
Trotter, Neville


Dykes, Hugh
Moate, Roger
Tugendhat, Christopher


Edwards, Nicholas (Pembroke)
Monro, Hector
Van Straubenzee, W. R.


Eyre, Reginald
More, Jasper (Ludlow)
Wainwright, Richard (Colne V)


Fisher, Sir Nigel
Morgan, Geraint
Wakeham, John


Fletcher-Cooke, Charles
Morrison, Charles (Devizes)
Wall, Patrick


Gardiner, George (Reigate)
Nelson, Anthony
Warren, Kenneth


Goodlad, Alastair
Neubert, Michael
Weatherill, Bernard


Grant, Anthony (Harrow C)
Newton, Tony
Wiggin, Jerry


Grieve, Percy
Nott, John
Wilson, Gordon (Dundee E)


Griffiths, Eldon
Page, Rt Hon R. Graham (Crosby)
Winterton, Nicholas


Hannam, John
Pardoe, John
Wood, Rt Hon Richard


Harvie Anderson, Rt Hon Miss
Parkinson, Cecil
Young, Sir G. (Ealing, Acton)


Hawkins, Paul
Penhaligon, David



Higgins, Terence L.
Percival, Ian
TELLERS FOR THE AYES:


Hooson, Emlyn
Rathbone, Tim



Hordern, Peter
Rees, Peter (Dover &amp; Deal)
Mr. Adam Butler and


Howe, Rt Hon Sir Geoffrey
Reid, George
Mr. Russell Fairgrieve


Howell, David (Guildford)
Ridley, Hon Nicholas





NOES


Anderson, Donald
Cunningham, G. (Islington S)
Forrester, John


Atkinson, Norman
Cunningham, Dr J. (Whiteh)
Fowler, Gerald (The Wrekin)


Barnett, Rt Hon Joel (Heywood)
Davidson, Arthur
Freeson, Reginald


Bates, Alf
Davies, Denzil (Llanelli)
Garrett, John (Norwich S)


Blenkinsop, Arthur
Deakins, Eric
George, Bruce


Boardman, H.
Dormand, J. D.
Gilbert, Dr John


Booth, Albert
Dunwoody, Mrs Gwyneth
Gould, Bryan


Brown, Hugh D. (Provan)
Eadie, Alex
Hardy, Peter


Butler, Mrs Joyce (Wood Green)
Edge, Geoff
Harrison, Walter (Wakefield)


Canavan, Dennis
Edwards, Robert (Wolv SE)
Hayman, Mrs Helene


Castle, Rt Hon Barbara
Ellis, John (Brigg &amp; Scun)
Heffer, Eric S.


Clemitson, Ivor
Ennals, David
Hooley, Frank


Cocks, Michael (Bristol S)
Evans, Fred (Caerphilly)
Horam, John


Cohen, Stanley
Evans, Ioan (Aberdare)
Hughes, Rt Hon C. (Anglesey)


Coleman, Donald
Flannery, Martin
Hughes, Mark (Durham)




Irving, Rt Hon S. (Dartford)
Mulley, Rt Hon Frederick
Summerskill, Hon Dr Shirley


Jackson, Miss Margaret (Lincoln)
Newens, Stanley
Taylor, Mrs Ann (Bolton W)


Janner, Greville
Ogden, Eric
Thomas, Mike (Newcastle E)


Jenkins, Hugh (Putney)
Palmer, Arthur
Thomas, Ron (Bristol NW)


John, Brynmor
Pavitt, Laurie
Tinn, James


Jones, Dan (Burnley)
Powell, Rt Hon J. Enoch
Urwin, T. W.


Kaufman, Gerald
Prescott, John
Walker, Harold (Doncaster)


Lamborn, Harry
Radice, Giles
Walker, Terry (Kingswood)


Litterick, Tom
Roberts, Gw[...]ym (Cannock)
Ward, Michael


Lyons, Edward (Bradford W)
Roper, John
Watkins, David


McCusker, H.
Ryman, John
Watkinson, John


MacFarquhar, Roderick
Sandelson, Neville
Weitzman, David


Mackenzie, Gregor
Sheldon, Robert (Ashton-u-Lyne)
Wellbeloved, James


McMillan, Tom (Glasgow C)
Short, Rt Hon E. (Newcastle C)
White, Frank R. (Bury)


Magee, Bryan
Short, Mrs Penée (Wolv NE)
Williams, W. T. (Warrington)


Marks, Kenneth
Silkin, Rt Hon John (Deptford)
Woodall, Alec


Meacher, Michael
Skinner, Dennis
Wrigglesworth, Ian


Mellish, Rt Hon Robert
Small, William



Miller, Dr M. S. (E Kilbride)
Smith, John (N Lanarkshire)
TELLERS FOR THE NOES:


Mitchell, R. C. (Solon, Itchen)
Spriggs, Leslie
Mr. James Hamilton and


Molloy, William
Stewart, Rt Hon M. (Fulham)
Mr. Joseph Harper.


Moonman, Eric
Stoddart, David

Question accordingly agreed to.

Mr. David Howell: On a point of order, Mr. Deputy Speaker. In view of that result, is not it now clear to the Government that what this country wants is the 10 per cent. rate of VAT which we have proposed and not the 25 per cent. high rate, which is clearly leading to intolerable anomalies? In view of the outcome of the Division, will not the Chancellor of the Exchequer come to the House to explain the Government's intentions?

The Chief Secretary to the Treasury (Mr. Joel Barnett): Further to that point of order, Mr. Deputy Speaker. What is clear in this House and outside it is the hypocrisy of the Opposition, who talk about the public sector borrowing requirement and are prepared to increase it by up to £100 million a year. Certainly we shall take note of that.

Mr. Pardoe: Further to that point of order, Mr. Deputy Speaker. Is not it obvious to the House that, in fact, this is not an attack on the borrowing requirement? It is not an attempt to raise it. A 10 per cent. rate of VAT would cut the borrowing requirement substantially more than this would increase it by.

Mr. Nott: Further to that point of order, Mr. Deputy Speaker. It is quite wrong for the Chief Secretary to make an inaccurate remark of that sort on a point of order. Since these debates began we have proposed and said that the country wants a 10 per cent rate which would raise more revenue than the proposals that the Government have put forward. Therefore, we repeat our request that the

Chancellor of the Exchequer should come to the House and withdraw the higher rate of VAT, as we have said all along, and replace it with a 10 per cent. rate across the board which would raise more and not less revenue for the Government.

Mr. Joel Barnett: Further to that point of order, Mr. Deputy Speaker. I take note that what the Opposition want to do is to increase the standard rate of VAT to 10 per cent. and add to the retail price index accordingly.

Mr. Deputy Speaker: We must get on to boats, canoes. etc.

Mr. Wiggin: I beg to move Amendment No. 36, in page 87, line 42, at end insert—

'(ii) boats and canoes of rigid construction designed to be propelled solely by oars or paddles, and
(iii) open or partially decked boats with an open cockpit whose principal form of propulsion is by sails and which are not constructed or capable of being adapted to be propelled by machinery internally installed and which have no built-in living accommodation:'.

Mr. Deputy Speaker: With this we shall discuss the following amendments: No. 35, in page 87, line 42, at end insert—
'(ii) boats having an overall length of less than 10 metres.

No. 39, in page 87, line 43, at end insert—
'except those excepted from Item I above'.

No. 41, in page 88, line 3, at end insert—
'unless necessary for the safety of the vessel'.

No. 42, in page 88, line 8, leave out subsection (d).

No 43, in page 88, line 18, at end insert—
'if fitted before the first issue of a certificate of airworthiness or permit to fly'.

Mr. Wiggin: I can only hope that the result of the next Division will be as propitious as the result in the last one. [Interruption.]

Mr. Deputy Speaker: Order. Let us have some quiet please.

Mr. Wiggin: The situation is highlighted by the fact that the total revenue received from the higher rate of VAT on boats will be a mere £4 million, and the Bill has now been altered to the extent of £90 million. I suggest that the Government should withdraw Clause 17 and Schedule 7 from the Bill and adopt the suggestion that has been made so many times by the Opposition. We, the boating industry and all the other industries which have been singled out, are prepared to accept a 10 per cent. flat rate because we believe it to be fair. It was quite wrong of the Chief Secretary to make the remarks he did a few moments ago, because he knows full well that if we have repeated it once we have repeated it a hundred times. We have offered him extra taxation. This is a unique situation.
This group of amendments can be divided into various sections. Amendment No. 36 deals with boats that are propelled by oars or by sail but do not have an internally mounted engine. The amendment is designed to exempt rowing boats and small sailing dinghies from the higher rate. "Physical boats" is perhaps too much of a shorthand term, but I am quite certain that the legal language is easily understood, and the House will appreciate the point I am making.
The hon. Member for Newham, South (Mr. Spearing) tabled a similar amendment which he has now removed from the Notice Paper. I assured him that I would make it clear that there was no conflict of interest on this matter. We both agree that there is a special case to be made for small boats, very often manned by young people who have had instruction at public expense on how to row or sail these boats and who cannot in any way be described as rich or as doing anything which should be singled out by a Socialist mind for a special fiscal penalty.
Amendment No. 35 deals with boats that have an overall length of less than 10 metres, which I believe is approximately 32 ft. 6 ins. This section of the boating industry largely contributes to repairs and exports. That is the main value of the industry. It does not include the very large yachts, the luxury boats, or those which can truly be described as being in a different class. They are not owned to a large extent by rich people, although it is true to say that some boats of 30 ft. and over can be extremely expensive.
The industry means a great deal to this country because of its exports. If Amendment No. 35 were accepted, it would be a valuable concession to the boat building industry.
Grouped with these amendments are Amendments Nos. 41, 42 and 43. I suspect that the hon. Member for the Isle of Wight (Mr. Ross) will have something to say about the general safety provisions in Amendment No. 41.
Amendment No. 42, which proposes leaving out subsection (d), relates to specific items of equipment needed for safety purposes.
Amendment No. 43 is on a separate point regarding spare parts for aeroplanes. In view of the grouping, I will deal with that matter in a different way towards the end of my speech.
I think it might be useful to mention Amendment No. 42 initially. Item 5(d) will alleviate the burden on
compasses, echo sounders, radar sets, logs, wind speed, wind direction and boat speed indicators, and other navigational and meteorological instruments and recorders.
I said that it alleviated the burden. I should have said that it included the heavy burden on those items. Yesterday the Government indicated that compasses, echo sounders and radar sets would be included in the order which is due to come before the House shortly.
My plea, which I made in Committee—as far as I can see, no cognisance has been taken of it—is that a log, for example, is every bit as important a piece of safety equipment as an echo sounder. I do not think that it can be argued that one is more important than the other. In order to establish one's position at sea, it is necessary to have a log. I am prepared to accept that wind speed, wind


direction and boat speed indicators are not in the same category. However, there are various bits and pieces which contribute to the safety and position-finding of small boats.
I am not satisfied that the Government have been as fair and open-minded as they should have been on which accessories to exempt from the higher rate of VAT.
We are in the difficulty of knowing that the Government are not prepared to accept any amendment of the schedule. But I think that they must accept that a delegation from the Royal Yachting Association and other interests should talk to the Customs and Excise and the Minister about these matters. No doubt this matter can be satisfied if the Minister will give a reasonable assurance that he will be open-minded about some of the items of navigational equipment that I have mentioned.
The general question of safety is difficult. I have some sympathy for the Revenue when considering what should or should not be exempted on safety grounds. It can be argued that at sea the vessel itself requires to be sound to ensure the safety of the occupants. A line has to be drawn. Earlier, when the Financial Secretary was arguing about lines being drawn, he in fact produced more lines over which we could argue. This extra rate has created the difficulty.
We had some fairly lengthy debates both in this Chamber and upstairs on the whole effect of the higher rate of VAT on the boat building industry. But the Government have consistently failed to take any cognisance of the effects of their actions.
I should like to remind the House briefly of the figures that the Ship and Boat Builders National Federation has received as a result of its questionnaire. Since the announcement of the higher rate, the federation has been looking into its effect on inquiries, orders and employment. Despite the fact that the Treasury has time and again said that this decline will flatten off and that people will get used to the higher rate, the evidence does not show that.
8.45 p.m.
The percentage cut-back in employ-

ment, which was 31 per cent. in the first fortnight in May, rose to 42 per cent. in the second half of May. It was 37½ per cent. in the first half of June and 37½ per cent. again in the second half of June. It shows a consistency that leads me to believe one can assume a permanent cut-back of 35 to 40 per cent. in the labour force. The hon. Gentleman says a mere 10,000 people work in the boat building industry, but here we are talking of 2,000 or 3,000 people. What is the cost of keeping them on unemployment benefit? What is the cost of paying redundancy and so on? This has to be balanced against this piffling quantity of revenue, £3¼ million to £4 million, to be produced, apparently, from this tax.
Since I am on the subject of revenue, the Minister of State will recall that we had an argument in Committee as to what revenue this tax would produce, and the cut-back in boat sales that had been estimated by the Treasury. I checked the Official Report of the Committee proceedings, and the Minister's answers on this point were extremely unsatisfactory. It is quite clear that the revenue estimates had been made on the assumption that there would be no reduction in sales of boats, or repairs, or all the other things.

Mr. Denzil Davies: indicated dissent.

Mr. Wiggin: The hon. Gentleman shakes his head but he must make out a better case on the Floor of the House than he made upstairs.
Confirming the trend, the Boat Builders Federation tells me of a very unhappy record, that 44 firms have left the federation, having either closed down or having a receiver in as a result of the economic pressure being put on the boat building industry. This is an infinitely greater number than it has ever recorded at a quarterly meeting, and is two or three times greater than has been reported in the past. These items are the proof. The Minister must accept that these things have happened. He cannot turn a blind eye to them.
The industry sells about £100 million worth of items on the home market and exports £41½ million worth of goods. Time and again, history has shown that without a healthy domestic market exports cannot be maintained. The Government talk of the shipbuilding industry,


but that part of the boating industry that we are discussing, that part which builds boats, is 47 per cent. of the shipbuilding industry, a very substantial part of the whole. It has been a very prosperous industry and has done an extremely good job in producing exports in the few years since the war in which it has really been prospering.
I do not know the Minister's thoughts on the figure at which unemployment is now running. It has been suggested that unemployment in the industry could be as high as 5,000, or even more. The hon. Gentleman may have access, through his right hon. Friend, to other figures, and perhaps he can tell us how many people he has put out of work, out of the work that was, and is, and should be available, about which the Government make so many noises on the one hand and on the other introduce a selective imposition of this nature.
Remarks have been passed from the Government benches that boating is not necessary at this time of crisis, and vet 62 per cent. of all boat owners are in the socio-economic classes C1 and C2, which include highly skilled tradesmen, teachers, bus drivers and the like. Anyone who goes to an average sailing club will realise that this is not a rich man's sport but a sport enjoyed by more people—2¾ million—on a fine Saturday afternoon in the summer than watch football from all the terraces in the country.
The Treasury has made a great mistake here. I believe it thought that it was going to put out of business a few rich people with a few large yachts, but it has affected the weekly sport of 2¾ million people. That does not seem to tie up with some of the other objectives that the Minister of Sport talks about. Why should boating be picked out in this way? Why should those who go out in a dinghy be treated separately from those who go to a golf course or, for that matter, play polo? It is a ridiculous way of raising tax revenue. The industry is now estimating a cut-back of some 50 per cent. if this imposition is not lifted. This will leave the United Kingdom market bereft of some of its finest builders and open to foreign competition when our general economic position improves. It is tragic that the industry should be treated in such a way.
I turn to the amendment about smaller boats. In relation to the whole industry, the dinghy, canoe and rowing boat manufacturers are quite a small part, but it is their products that the largest number of people enjoy and use every week. There is not a strong revenue argument on dinghies and rowing boats. I do not know how the Minister thinks the revenue would be affected if the amendment were passed. The sum involved would certainly not be large, although measurable.
In view of your grouping, Mr. Deputy Speaker, I hope that I shall be forgiven if I change the subject, because Amendment No. 43 deals with spare parts for aircraft. Boats and aircraft are grouped in the schedule, so it is not as illogical as it may seem to take these items together.
It is difficult for the small number of firms concerned to deal with high-rate VAT on spare parts of aircraft. When the matter was raised in Committee upsairs, the sense of the Minister's argument in rejecting our amendment was simple. The suggestion was that if we had one rate on completed aircraft and a different rate on spare parts it would be possible to buy all the spare parts, screw them together and make a whole aeroplane at the lower rate of VAT. It would be possible, and in the old days of purchase tax people used to do that sort of thing with certain motor cars. But we have found out the figures. The major parts for a Cherokee 140 from America would cost only £700 less than the complete aircraft. The cost of the work of assembly and bits and pieces, such as nuts and bolts, is almost certainly about 50 per cent. more than the cost of spare parts, so nobody would carry out the exercise that the Government envisaged. I am certain that the General Aviation Manufacturers and Traders Association would be willing to make out the case to the Minister.
Spare parts for aircraft are on the whole extremely expensive—between 40 per cent. and 50 per cent. more expensive than when part of the whole. In addition, the high rate of VAT will make it hard for some clubs and others to keep aircraft in the air. The parts have to be inspected, maintained and fitted to standards set by the Air Registration Board.
One leading agent in this country for a well-known make of American aircraft carries over 2,000 separate spare parts,


and it will have to argue with the Customs about every one, more particularly since the Government's recent concessions. It may well be involved in three rates of VAT—zero rate, standard rate and the 25 per cent. rate. The administrative work will be tedious beyond belief. There will be almost no revenue from the sale of spare parts for aircraft. It will certainly be smaller than anything that we have talked about so far. The cost of administering the higher rate and the inspecting and checking will probably wildly exceed the total revenue.
The case for the amendment is lengthy. I have said enough, having already raised the matter upstairs. The Opposition's main purpose is to vote on the amendment on small boats, but we have made out a case for the whole boating industry and for certain sections of the aircraft industry.
There are several other points about aircraft that have not been answered. No amendments have been tabled by the Government, and there are substantial inequalities in this area. Therefore, I remind the Minister once more that if, on the one hand, he is prepared to introduce selective taxation of one industry, put many people out of work at considerable cost to our export and domestic markets, and to do so without rhyme or reason—political, fiscal or domestic—this is the worst possible way of levying taxation. It is something that the whole House should—and, I hope, will—reject.

Mr. Deputy Speaker: In view of the fact that there was considerable noise in the Chamber when I announced the groupings of the amendments under discussion, I make it clear to the House that we are discussing Amendments Nos. 36, 35, 39, 41, 42 and 43 together.

Mr. Nigel Spearing: I wish to address my remarks solely to Amendment No. 36, which happens to be the first in the grouping and, therefore, technically the amendment on which this debate hangs.
The amendment seeks to exempt broadly three classes of vessels—those propelled by oars or paddles, namely rowing boats and canoes, and what effectively are called sailing dinghies. I originally tabled an amendment of this nature. In

view of its similarity to the amendment tabled by the Opposition—the origin of which I know—I withdrew my amendment although some consultations had taken place on it, but not with the Opposition. The hon. Member for Weston-super-Mare (Mr. Wiggin) has mentioned this although he and his party have been more concerned with the larger vessels, equipment for sea-going pleasure vessels, the proper interests of the Ship and Boatbuilders National Federation and the employment of people in the small ship industry.
However, my concern is with the users of small boats, particularly young people, youth clubs, uniformed organisations and those who use their own muscles to propel these vessels. A large number of young people row or canoe on our lakes and rivers. I believe that inadvertently the Chancellor, in looking at the boating industry as a whole and its aura, for the reasons we know, has clobbered youth organisations and young people to the extent of 25 per cent. VAT on this form of recreation and sport.
My concern is increased because during my five years as a teacher in Inner London I coached in rowing on the Thames. My own local authority has provided water recreation centres not only in Essex but even in my own area. The activity of young people propelling themselves on water is one of the most character-building activities I know. In the general public's esteem, boating as a whole and this sort of activity is not held high, certainly not by the Chancellor.
There are two junior championships of world standard taking place in this country this year, the Junior Sailing Championships and the World Rowing Championships, which will take place at Holme Pierrepoint, Nottingham. It is unfortunate that those championships have coincided with an increase in tax on these craft from 8 per cent. to 25 per cent.
9.0 p.m.
The amendment was put together principally by the combined efforts of the Amateur Rowing Association, the British Canoe Union and the Royal Yachting Association. They feel that participants in these sports have been singled out.
These three sports, sailing, rowing, and canoeing—are Olympic sports. They are not just recreations. They are sports in


their own right. Although other sports may be taxed in certain ways, and certainly some pastimes are taxed, I think I am right in saying—my hon. Friend the Minister will correct me if I am wrong—that these are the first sports in which substantial equipment is used which is taxed in this way. Until the onset of VAT they were not taxed at all. Then we had VAT at 10 per cent. and at 8 per cent., and it has now suddenly shot to 25 per cent. This is a substantial part of the cost of equipment, which is significant in these sports.
I tabled a number of Questions immediately this matter was raised by the Budget speech as to the yield not from boatbuilding in general or large craft but specifically from boats propelled by oars or paddles and centre-board sailing dinghies. The Chancellor has not been able to reply. I have put down Questions but he has merely referred to his previous answers, in which he has not been able to tell me about this. Therefore, I hope that my hon. Friend the Minister of State will at least be able to give an estimate of the yield from these specific types of small boats. Even if he maintains his position, he has a duty to tell the House what the yield will be.
But these things are not in the luxury class. I do not think that anyone paddling a small canoe on the Thames or the lakes of this country or its rivers can be regarded as enjoying a luxury. Furthermore, anyone will know that if young people are at risk or in trouble, the paddling of a canoe, perhaps on the River Wye, the River Wey or the canals, is a very good prospect. I know of very few other activities which can incorporate a physical challenge to young people, a certain amount of risk, a certain excitement and a sense of achievement. We talk about combating vandalism. That is something about which we know quite a lot in East London.
These are the sorts of activities that we ought to encourage. In the end it depends on dedicated individuals and dedicated youth leadership. It is true that certain of these craft might get VAT exemption because they are purchased by local education authorities, but certain youth clubs and other organisations cannot obtain that rebate. When young people become enthusiastic about these

physical sports, they want a vessel of their own. A 25 per cent. charge on a £40 or £50 canoe is quite substantial for a young person.
The Chancellor, in imposing at least some differential taxes on boating as a whole, perhaps rightly—I shall not go into that matter in principle because it is contentious—ought to have given some sort of concession on the class of vessel I have been describing.
Dinghy sailing is not the class occupation it once was. Certainly in canoeing there is a mass of young persons participating. There are 400 clubs in this country and an estimated 500,000 young people go canoeing. Local authorities are encouraging young people to take up rowing. Who knows—even the London docks may have some use for this in the future.
That has been recognised by the Government, because the Minister responsible for sport, on receiving representations from one rowing club, wrote to Lord Greenwood, a letter containing the following paragraph:
I am particularly concerned with the impact which this"—
that is, the tax—
may have on the cost of the smallest classes of boats such a s skiffs and canoes which are used by so many sportsmen and sportswomen, and particularly the young. I sympathise with the view that these craft should not be subject to higher rate, and I am already discussing this with the Chancellor of the Exchequer.
I fear very much that my hon. Friend the Minister responsible for sport may not have been successful, although I hope that my hon. Friend the Minister of State may have something to tell us, because this is a very specific and narrowly-drawn amendment which should have universal support from the whole House.
Not surprisingly, there has been a reaction from those involved in the sports. They have been asked why they should be singled out. The answer, of course, is that the tax is easy to collect and is part of a larger Government exercise. The people involved with small boat sailing are not only very law-abiding; they are usually civic-minded. The fact they have been clobbered in this way, perhaps unintentionally, produces an understandable reaction and an "us and them" attitude.
The Government pay lip service to the building of character and the encouragement of healthy sports. I know hon. Members think that I have strong views about the Common Market, but the Minister will not tell us how much this concession costs and I must point out that the Revenue contributes £12 million, from the Treasury no doubt, to support tobacco growing in Europe. I can think of nothing more incongruous than that the Chancellor should put a 25 per cent. tax on these craft without telling us how much money it will bring in and at the same time there is going through the books, unknown to the country as a whole, £12 million to the Common Market for tobacco growing in Europe. We have to pay it whether we like it or not. This is an anomaly which causes distress and a certain amount of justified criticism.
I think it is likely that the Minister will not accept any of the amendments, but I hope that in future when macro-tax changes, like this one or television rentals, come along, he and his advisers will show a little more care, finesse and skill in the way the tax is imposed.
There is probably a case for taxing some of the larger vessels and maybe even the boat building industry as a whole. However, any such amendment should have included some sort of concession for the vessels and people whose case I have put tonight.

Mr. Stephen Ross: I represent a constituency whose livelihood over the years has depended greatly on the sailing industry. I know that my hon. Friend the Member for Berwick-on-Tweed (Mr. Beith) defended the sailing industry during the Standing Committee proceedings, and I will not repeat what he said there.
My constituents are extremely worried about this tax, which will have a pretty disastrous effect on boat builders and the many ancillary industries which depend on them for their livelihoods.
We are proud of our history in sailing generally and the fact that the National Sailing Centre was recently erected on the River Medina. That does not cater for the wealthy. It caters for the people of whom the hon. Member for Newham, South (Mr. Spearing) has just been speaking.
Over the years we have built up an expertise in the building of craft. The present boat of the former Leader of the Opposition, the right hon. Member for Sidcup (Mr. Heath) was built elsewhere, but his two previous boats were both built on the island.
I invite Members of the Government Front Bench, the Prime Minister and the Chancellor of the Exchequer to come to the Isle of Wight during the Summer Recess, if they have time, to see who enjoys the sailing facilities on the Solent. It is not the wealthy but the small people of modest means who are enjoying their weekends, holidays and recreation time.
9.15 p.m.
I would like to quote from one or two letters that indicate what I have beeen trying to say. One comes from Royal Solent Yacht Club, which it is probably true to say does not have among its members many of the harder-up section of the community. It pointed out that:
over 2,000 boats started off on line last year and at least 90 per cent. of these fall into the category of those who sail on a very tight budget. About one third of them sail small boats such as Scows or Mirror dinghies.
That is a very large number.
The Yarmouth Sailing Club represents what I would describe as the artisan side of the sport which started up only a few years ago. It wrote:
Most of our dinghy sailors are young people and from the point of view of maintaining their boats and safety equipment it does not seem right to impose a tax just because they happen to live by the water and are being taught to use it for their sport and leisure. This club has been the happy recipient of a Sports Council Grant, and there is a National Sail Training Centre 10 miles away, it does not make sense to encourage a sport and then tax it extra heavily.
Copland Boats, set up with the aid of a grant under the arrangements for rural industries at Ventnor, sent me a letter which says:
Since the 1st May when the new tax became effective we have received only one new order and this resulted from an insurance claim so the customer is not himself affected by the tax. We have also received cancellations of orders placed by our UK agents totalling some £35,500 and as you can well imagine for a small firm like ourselves with only twenty-five employees this is disastrous.
The island does not receive any Government assistance, but we have always suffered from a high rate of unemployment, and if a firm with even 25 employees


closes down, that could have very serious effects on unemployment, particularly in the winter months.
A. H. Moody and Son Limited will have written to many hon. Members. The firm is amongst the biggest yacht and boat builders. It wrote earlier in the summer saying that it had not had a single order since the tax was imposed, and I have received many letters from it since. Naval architects who are resident and established on the island are similarly losing business.
Baron Instruments Limited wrote to me saying:
I am sure that as the Member for the Isle of Wight you are fully aware of the problems besetting the industry, and the inevitable results in unemployment and lost sales that we now face.
These are the people who make the safety instruments that go on the boats. The world-famous firm of sailmakers, Ratsey and Lapthorn Ltd., wrote to me saying:
we would emphasise the very serious effect the imposition of such a high rate of Tax would have on our home sales. These had already declined very considerably due to the general retrogression in the boat-building industry in the past year.
Dodnor Marine Limited, a small company up the Medina River, wrote to the Chancellor to say how horrified it was over the tax. The letter said:
I would beg you to consider who suffers most in this kind of situation. It is those who do not have a powerful voice.
The firm recognises the special financial situation of the country, but it goes on to say:
it seems as if our boat-building industry will take a terrible knock from the 25 per cent. VAT".
It says that perhaps the Chancellor was justified in having a go at the top end of the market:
but even that might be questionable in terms of the suffering imposed on the work force in the Industry. It was suffering enough from the two year restriction on mortgages and most yards have been reducing their labour force because of this, further reductions seem inevitable. Many of these men will simply go on the dole in areas like this. In my opinion they would be better having the dignity of work rather than being a burden on the State.
This is one company which specialises in the cheaper types of boat which sell for under £1,000, so that it hardly caters for clients in a rich man's sport.
I would like to go on to deal with the question of safety equipment, although I accept one concession has been made. I have heard from bilge pump manufacturers, but I understand that they are not included in the category of safety equipment. That is one of the stupidities of VAT which can be compared with purchase tax. The 25 per cent. rate applies to properly fitted bilge pumps, whereas portable bilge pumps, which are markedly less effective, attract an 8 per cent. rate.
9.15 p.m.
I now refer to national lifeboat launchings, which is relevant to the question of safety equipment In 1974, 2,659 lifeboat launches were recorded, of which 1,512 were in respect of the rescue of pleasure craft. Unfortunately, 215 lives were lost, 54 from pleasure craft.
We know of the great calls on the lifeboat services and helicopters in the summer when people get into difficulties. It is important that all boats should carry proper safety equipment. We would like the Government to look at the other amendments dealing with safety equipment to see whether their concession cannot be extended over the whole range.

Mr. Monro: The hon. Member for the Isle of Wight (Mr. Ross) highlighted the disastrous mess which the Government have made of the small boat building industry. He was supported by the hon. Member for Newham, South (Mr. Spearing) on the question of recreation. The trouble is caused by the fatal mistake of increasing the VAT rate on boats, canoes and equipment to 25 per cent. The arguments against doing so were ably deployed in Committee. However, no hon. Member, having read the Official Report of the Committee proceedings, could accept the Government's case.
I do not want the Minister of State to say that the Conservative Party is asking the Government to increase public expenditure. We do not call for that. We think that the rate of VAT should be reduced to 10 per cent., in which case the anomalies and hardships would not occur. We have seen the ridiculous position of the Government, who are spending £12 million to deal with tobacco growing in Europe while we are talking about £3 million or £4 million for the boat building industry.
The boat building industry and the activities of shipyards, chandlers and related suppliers, much of whose production is exported, is based on a sound home market. That home market has now disappeared. I was astonished that the Minister of State shook his head when the figures produced by the Ship and Boatbuilders National Federation were read out. Does he not accept those up-to-date figures? There is a definite hush from the Government. If he is not prepared to accept the figures produced by a reputable federation, it is hard to produce arguments to convince him of anything. Those figures show a catastrophic fall in the activity of the industry for orders received, monthly inquiries and employment.
I hope that the Minister will say something about employment. It is no use the Government shrugging the matter off and saying that it is of no significance and that it will right itself in the future. I do not see it that way. Will the Minister give the up-to-date figures? He was unable to do so to the satisfaction of the Committee. That was brought out on 24th June as reported at col. 373 of the Official Report. Hon. Members demonstrated that the Minister of State had made no allowance for the large reduction in sales.
We should like to know what return there would have been this year if the rate had stayed at 8 per cent. and what return is expected from the 25 per cent. rate this year. After the Minister has further reflected on the figures given to him by hon. Members of the fall in production, he will have to work hard to produce figures to convince the House that the increase in tax will have a significant impact on the economy. There is no doubt that it will cause hardship to recreation and employment.
In view of the hardship which is being caused, we condemn the Minister and his colleagues in the Treasury for failing to explain why boats, gliders and aircraft have been chosen for this heavy imposition. Either Ministers have been woefully badly advised by Treasury officials or they are completely out of touch with industry, sport and recreation.
We are glad for the concession made by the Government in relation to safety on certain items. I do not regard it as

a concession because the Government should never have imposed those extra burdens in the first place. In Amendments No. 41 and 42 we make a further plea for relief on additional safety equipment for which we argued earlier this evening. I hope that the Minister will also remember that the repair and maintenance of boats are just as important as safety.
The Government are hammering all those who are interested in canoes, sailing, dinghies, kayaks and rowing. Amendment No. 36 covers all those items. The drafting of that amendment was difficult bearing in mind that we had to keep down the size of the boats. We shall be happy if the Minister will say that this matter will be dealt with in another place.
There are large numbers of people, many of whom are young, who enjoy sailing and messing about in boats. Last year 60,000 people went through approved Royal Yachting Association courses. The argument is put forward that many rich people indulge in these sports. Of course there are some rich people who do so, but they are a very small proportion of the total number of people who enjoy all types of sailing.
It is significant that the Minister for sport has not been present either tonight or during the Second Reading debate. I understand that either this week or next week there is to be a White Paper on sport and recreation dealing with the development of opportunities for young people to take part in sports of all kinds, yet the Minister responsible for sport is not present tonight when the Treasury is seeking to make it much more difficult for people to take part in sailing, rowing and canoeing. It does not add up. Either the Treasury and the Department of the Environment do not speak to each other or they are on totally different wavelengths. It is high time that they got together and sorted out plans for our young people. Why does the Sports Council have its grants kept down to the minimum by the Treasury when we know that generally we are trying to develop sport and recreation through all manner of means?

Mr. Denzil Davies: I thought that the hon. Gentleman's party wanted to reduce public expenditure, but he is now asking for greater public expenditure on sport.

Mr. Monro: Good Lord, we have had this argument time and time again. This is a matter of priorities. If the Government want to spend thousands of millions of pounds on nationalisation involving land, oil pipelines and Lord knows what, let them do so, but I want to have another £10 million of the Government's vast expenditure put into sport and recreation. The expenditure of £4 million or £5 million would have taken all the nonsense out of this debate. We are talking about priorities that the hon. Gentleman does not begin to understand. He does not understand where the nation wishes the priorities to lie. It certainly does not want them to lie in the Department of Industry or in undesirable matters stemming from the Department of the Environment.
I pressed on the Government on Second Reading that in high-performance sports such as rowing, canoeing and kayak racing the boats are comparatively expensive. This increase in VAT will be very damaging. In canoeing and kayak racing the boats are battling in difficult water conditions. In white-water racing the casualty rate for boats is high. When a boat may cost £300 or £400, the addition of 25 per cent. VAT is a crippling burden.
The Government claim that they wish to finance the British Olympic Team in Montreal next year, but they handicap the training of our canoeists and others by this tax. It does not make sense. I hope that for no other reason than for the benefit of our youth in sport and recreation, the Government will look again at this ridiculous imposition.
No doubt the Minister will argue about the "large ticket" application of VAT and claim that it is simple to apply it to boats. I hope that by now he has discovered what a rag-bag of anomalies he has produced in the past few weeks. Although we shall welcome the order that will appear on 11th August, I very much doubt whether it will deal with anything more than a small proportion of the anomalies of which we are so critical.
The other amendments are related to aircraft. We have had an explicit explanation of the situation as regards aircraft parts. I hope that the Minister will accept the amendments or take them away for consideration in relation to the

total issue, including those matters which lead to the award of a certificate of airworthiness. If everything up to that point was accepted, that would be a further step towards helping the light aircraft industry, an industry which has suffered a heavy blow as a result of the Bill.
We are particularly disappointed that the Minister has not tabled any amendments on the points he promised to look at again in Standing Committee. No amendments have been tabled to deal with gliding. Nothing has been done for solo flying courses. I hope that those matters will be considered again.
Tonight we see a devastating attack by the Government—admittedly, I believe that they acted without realising what they were doing—on the recreational side of small boats, on rowing, on canoeing and on boats up to 10 metres. Surely, in view of the minute amount of revenue that is likely to accrue from these provisions, the Minister will say "We have made a mess of things. Therefore, we shall take the matter back and deal with it later by order".

9.30 p.m.

Mr. Jim Spicer: In this debate there has been a degree of unanimity in the House which we have seldom seen in the past year. Everybody will agree with the remarks of the honourable Member for Newham, South (Mr. Spearing) about provision for sport for young people. I personally can vouch for the comments by the honourable Member for the Isle of Wight (Mr. Ross) about the National Sailing Centre. I attended a course held at the centre, and I know that that organisation is short of money. Certainly the increase in rate will mean a restriction of its work.
In my constituency we have an adventure centre which caters for the 30,000 to 40,000 young people a year who undertake short courses. The organisers are under pressure from the Department of Education and Science, and that pressure will grow. The organisation carries out canoeing and small boating, and there is a desperate need for it to continue its work.
I wish to turn to the other aspect of the matter—namely, the employment consideration. This afternoon we heard the Lord President of the Council say in ringing tones that one of the main aims


of social policy was to bend all our energies towards ending unemployment. The hon. Member for the Isle of Wight spoke of a firm employing 25 or 30 people, and I am certain that the hon. Member for Southampton, Test (Mr. Gould) could also point to other small employers with that kind of work force in his constituency, which is suffering as a result of these measures.
I can give evidence of one firm in my constituency which is a boat-building concern employing 22 people. In the year 1972–73 the firm's turnover was £68,000, and of that total 19·3 per cent. went for export. In 1973–74 its turnover had increased to £120,000 of which 33·3 per cent. went for export. The firm's expectations for 1974–75 are £136,000, of which half will go for export. But the vital component within that overall export order lies in the fact that the firm must have a firm base and a good home market. The firm has not sold a single boat on the home market since the imposition of VAT, and it will go out of business. It is hypocrisy of the worst order for the Government to lay this legislation before the House and yet impose this levy on a small section of industry which caters for a wide section of people who occasionally wish to enjoy themselves. At the same time, Labour claims to be a party that wishes to keep unemployment down to an acceptable level.
I can also point to other areas of employment in my constituency, such as the caravan trade, in which 25 to 30 people inevitably will lose their jobs following the Government's decision to increase VAT. The provisions of the Finance Bill in this respect are idiotic. I hope that even at this late stage the Government will see fit to withdraw them. They are nonsense, and nobody in the House, apart from the Minister, can accept what has been proposed.

Mr. Ridley: I wish to support what has been said on this amendment. I shall not repeat the arguments, since they stand on their merits—and those merits are extremely good ones.
It is extraordinary that the Government wish to discriminate in this fashion. The hon. Member for Gateshead, West (Mr. Horam) said that a flat rate amounted to discrimination of the Con-

servative sort—thus implying that by substituting a 25 per cent. rate on boats and small boats, the tax amounted to Labour discrimination. In other words, both methods were discriminatory and he felt that no system of indirect taxation could be non-discriminatory.
I wonder whether those sentiments would be echoed by the Minister of State? It is extraordinary that there should be discrimination against those who row in boats or who canoe or sail. I shall not make any special argument for these people—my hon. Friends have done it with great skill—but it seems to me to be the most extraordinary idea of the meaning of non-discrimination that a flat rate is discriminating against some groups of people but that to single out this particular category is non-discriminatory.
I shall vote for the amendment—I do not think it will cost very much money—and I want to say why I think it should be made part of the Bill. I suspect that it might be accepted by the House. We have just had an amendment accepted by a majority of two. The Chief Secretary, with monstrous impishness, said that we were trying to increase the borrowing requirement, and that it was humbug on the part of the Opposition to press these amendments when the borrowing requirement would go up as a result.
I do not think that anybody has tried harder than I have over the years to reduce the borrowing requirement of this Government and the previous Government. I remind the House that I and many other hon. Friends have consistently said that VAT should be at 10 per cent. I do not know how many hundred million pounds more would be brought in if the VAT were at 10 per cent.—I cannot remember the exact figure—but, if it is not enough, let us put it at 12 or 15 per cent. I do not mind. I am quite happy to see VAT raised to reduce the borrowing requirement. What I find obnoxious is that the Government should discriminate in this way.
I do not think the Government's argument is fair, and I hope that the Minister of State, whom we all respect, will not use it on this occasion. If we had been able to move, either here or in Committee, to increase the rate of VAT, we could easily have caused the cost of this


amendment and the previous one to disappear. We are quite prepared to do that. If the hon. Gentleman will move a recommittal motion and a new financial resolution, I will go back to the Committee upstairs in order to facilitate the increase in the rate of VAT over all items, provided that he undertakes to drop the discriminatory selective 25 per cent.
There is a challenge to the Government. If they accuse the Opposition of trying to reduce taxation and increase the borrowing requirement, let them take us at our word and see if they cannot get our votes in Committee to increase the rate of VAT to 10 per cent., even though it might mean prolonging the Session beyond 8th August. I am not worried about a holiday.
Why were the Government defeated on the last amendment and why will they be defeated on this amendment? We saw the massed ranks of the Left wing of the Labour Party. Some of them even spoke, but none voted. It was not as if the fringe parties were fully manned and voting in the Lobby with the Opposition in the last Division. Neither from Ulster, from Scotland nor from Wales did we have support, though I acknowledge with pleasure and gratitude the support of the Liberal Party on that occasion.
So why were the Government defeated? Was it because of those who wished to increase the public sector borrowing requirement deliberately? Was it because of those who had deep fear and concern for people who are paying television rentals under existing contracts? Or was it because there was some other factor which made Labour Members unhappy to support the Government on this occasion? Could it be that, having had their salaries cut from what Boyle suggested, they thought that they would save some money which could be put to a good purpose, like reducing the VAT on television rentals? I am certain that they would be prepared to spend a little more on reducing the tax on rowing boats, canoes and sailing boats. I am sure that they would feel that this was the case. But what state has Parliament reached if the Government cannot control their own majoriy and get through their own tax law?
This seems to be a moment when we should see the Chancellor of the Exchequer here telling us how we can

accept the defeat of his proposals in the Finance Bill on Report.
I believe that this amendment will be defeated. Perhaps the maxim is, as it was in the days of the Roman Empire, that what causes the dissolution of the governing party is when Caesar does not pay the troops. If Caesar has failed to pay the troops more than an increase of £6 a week for four years, he deserves the defeat that he had on the last amendment, and he may be defeated on boats, too.
But I do not claim the aid of the Left wing on this occasion. I rely on the arguments of my hon. Friends and those of the hon. Member for Newham, South (Mr. Spearing) and the hon. Member for Isle of Wight (Mr. Ross), which do not need repeating. But if the Government dare say to us on another occasion that the reason why we pressed this amendment, the one before it and the one to follow it was that we wanted to reduce the rate of taxation and to increase the public sector borrowing requirement, they will not be telling the truth. We have made it clear throughout that we regard these proposals as discriminatory. That is why I shall support my right hon. and hon. Friends if they press the amendment to a Division.

Mr. Tony Durant: I shall not attempt to equal the eloquence of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who put the argument so expertly and explained the underlying feeling of the Opposition about the imposition of a VAT rate of 25 per cent. instead of retaining the 10 per cent. rate which we introduced.
I want merely to support what the hon. Member for Newham, South (Mr. Spearing) said on behalf of the rowing fraternity. I represent a constituency which has three rowing regattas each year. It is the only town which does, and it is a very important activity within my constituency.
I might point out that the people who row in those regattas are ordinary citizens of the area who come very often with their own boats, which they load on to vans. They put their boats into the water, and they row with great enthusiasm. Many go off with cups in great triumph. This is important to our society, and I


believe that the Government have not considered this correctly.
In my area there are two waterways, the Thames and the Kennet and Avon. We have been pleading in the all-party Inland Waterways Group for more money for inland waterways. I shall not go into the argument about that other than to say that if the Government had announced that the yield from the 25 per cent. rate of tax on small boats would be spent on waterways, people who row and sail might have said that this was quite a good idea because at last they would be likely to get a few locks open and a little more waterway on which to pursue their activities. But they know that the money will not be spent on that purpose. They know that it will be spent on general Government expenditure. Therefore, I make this special plea on behalf of this group of people who are ordinary citizens wishing to pursue these activities in their recreational time.
It seems extraordinary that the Government have not taken account of the fact that this year in Nottingham we have the world championships taking place on 20th August. It may be that the Prime Minister will be there welcoming everyone to the great rowing function, slapping everyone on the back, eating another strawberry and making the whole thing a wonderful function. If he is there, I hope he will be reminded that a great many British rowers have suffered meanwhile by not having the right boats for what they wish to do. The Olympic Games will be held next year. We have a high reputation in this sport and we have taken away many rowing prizes.
We must understand that the price of the average sculler is about £400. People save up and buy the boats themselves; they are not provided by clubs. With 25 per cent. VAT there is approximately an additional £70, which is a considerable sum.
We are an island race, and boats are part of our great tradition. The. Government have taxed one of the fundamental rights of the British citizen to enjoy his leisure. There have been speeches not only from hon. Members who represent seaside constituencies but from the hon. Member for Newham, South and from myself, who represent the ordinary citizen

who wants to partake in this sport. Therefore, I strongly support Amendment No. 36 and hope that it will be passed.

Mr. Denzil Davies: I shall deal first with Amendment No. 35, which is the main amendment relating to boats. I shall then deal with the other separate amendments and Amendment No. 36, to which my hon. Friend the Member for Newham, South (Mr. Spearing) spoke, and the amendments concerning safety and spare parts for aircraft.
Amendment No. 35, which we debated in Committee, would exclude practically all the boats which are now affected by the increase of 25 per cent. VAT. Many arguments have been put forward about why we should accept this amendment. They were put forward in Committee and we attempted to deal with them.
The first argument that I was going to put forward—but I do not think I can put it forward as the first argument now concerned the loss of revenue and the public sector borrowing requirement. I shall come back later to the figure for loss of revenue. Having sat here last night and listened to very good speeches from the Opposition and having been lectured about the public sector borrowing requirement by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who has now left the Chamber, but who has spoken so eloquently in the past about the need to contain the borrowing requirement, I studied my brief and concluded that the first reason for not accepting this amendment must be the effect on the borrowing requirement, small though it might be in relation to the last amendment. Alas, I cannot use that as the first argument now because the Opposition have shown in this regard, as in others, that so many of their speeches on public sector borrowing and public expenditure are hypocrisy and humbug.
Hon. Gentlemen may moan and groan, but they went into the Lobby on the last amendment and quite clearly voted for a loss of revenue in one year of £90 million and over three or four years of £200 million. They cannot get away from that. They put forward certain arguments, but the House has accepted a 25 per cent. rate of VAT. The Opposition put their arguments against it, but they were defeated. We argued a particular clause and Opposition Members who have made


speech after speech about the public sector borrowing requirement trooped into the Lobby to reduce the revenue by at least £100 million in one year. If they have a conscience about it now, I am sorry.

Mr. David Howell: The Minister of State is excellently showing that he can follows in his master's footsteps, but before he allows this distortion to follow many of the others which the Chancellor has so ably established in the public mind without any regard for the true facts, let me make it clear that our proposal to raise VAT from 8 to 10 per cent. would have increased the revenue by at least £700 million. The 25 per cent. rate, which we are totally against, would have increased it by £325 million. It is true that we voted for the cancellation of the vehicle excise duty increase of £270 million, but that would have left at least £100 million more in the revenue than anything proposed by the Treasury.

Mr. Davies: The hon. Gentleman cannot get away from it. The consequence of what he has done tonight is that we have lost that kind of revenue.

Mr. Ridley: If the hon. Gentleman accepts my challenge to move a recommittal motion and a new financial resolution, we will go back into Committee and accept a 10 per cent. rate of VAT.

Mr. Davies: The hon. Gentleman knows that is a bogus point. He spoke about conscience. I detected a faint note of conscience in his speech. After the eloquent argument that he put forward, I am sorry that he went into the Lobby as he did.
Hon. Gentlemen opposite talk about unemployment and the public sector borrowing requirement, but when it comes to the point their votes do not always match what they say.

Mr. Durant: May I remind the Minister that he has not answered his hon. Friend the Member for Newham, South (Mr. Spearing), who asked what the effect on the borrowing requirement was? He did not give the loss of revenue to his hon. Friend who raised this matter and has been trying to get an answer.

Mr. Davies: The hon. Gentleman must give me a chance. I have only just started my speech. I said that I would deal with Amendment No. 36 separately. I am dealing witht the main point now. The Opposition cannot get away from the consequences of what they did on the last amendment.
We debated unemployment upstairs in Committee. I said then, and I repeat, that an increase in indirect taxation is bound to have some effect in the short term on employment in the boating industry. It would be foolish and wrong to try to conceal that fact. However, we deny that the effect will be as great as hon. Gentlemen opposite have tried to make out.
Figures have been mentioned, but hon. Gentlemen did not point out that in the first three months of this year—these figures are accepted by the trade—there was a 40 per cent. drop in orders for boats. That was before the increase in VAT was introduced. Most, not all, of the effect that we are now seeing relates to that 40 per cent. drop in the first three months. That drop in sales, caused by world recession and other factors, is now filtering through to the industry. Therefore, most of what is now happening—the 40 per cent. drop in sales—relates to the first three months of the year before the increase in VAT was introduced.
The hon. Member for Weston-super-Mare (Mr. Wiggin) said that at the beginning of May there was a drop in employment of 31 per cent. He then tried to push up the percentage towards the end of May. That drop at the beginning of May was the result of the drop in sales in the first three months of this year.

Mr. Wiggin: If the hon. Gentleman is right, is it not all the more important that he should try not to hit an industry which is already down?

Mr. Davies: I said that I accepted that an increase in indirect taxation would have a short-term effect. The point that I was making was that the figures which were trotted out showed that most of the drop in employment was the result of the drop in orders in the first three months of this year before the tax was introduced.
I should point out that not the whole of the boating industry is affected. The upper end which is concerned with the larger boats is, and will remain, zero-rated. Exports are also zero-rated. Therefore, we are concerned only about part of the industry, not the whole of it. We are concerned with a labour force of 10,000 out of a total of 30,000. That is not an insignificant amount. We are not talking about the whole of the industry, although I accept that our measures will have some effect on a labour force of 10,000.
I turn next to the yield from the tax, on which we had arguments upstairs. I see no reason to resile from the figures which I gave in Committee. I said that in the year 1974–75 the yield at 8 per cent. was about £2½ million. That is the Treasury's estimate. There are no separate figures for the simple reason that all items were taxed at 10 per cent. and there was no need to separate them. As I said, the Treasury's figure was £2½ million, but higher figures have been given. Indeed, the hon. Member for Horsham and Crawley (Mr. Hordern) gave a figure of £3½ million.
If we take the figure of £2½ million, which is our best estimate; and a reduction of 40 per cent. in the first three months of the year; and, though there will be arguments on it, a further fall of, say, 10 per cent. as a result of increasing the rate to 25 per cent.—hon. Gentlemen mutter, but the trade itself accepts that the total effect will be 50 per cent. and that the 40 per cent. in the first three months and the 10 per cent. drop were the result of VAT—if we apply that to the VAT rate of 25 per cent. for the coming year compared with the 8 per cent., we estimate that there will be an additional yield of about £3 million as a result of the increase to 25 per cent. That is how the figures are arrived at. They are based on our best estimates. The result of accepting the amendment would be a loss of revenue of about £3 million, a small amount of money for Conservative Members.
I turn now to the amendment moved by my hon. Friend the Member for Newham, South.

Mr. Spearing: I am grateful for my Friend's comment, but that amendment

was moved by the hon. Member for Weston-super-Mare (Mr. Wiggin). The amendment which I originally tabled was withdrawn.

Mr. Davies: I am obliged to my hon. Friend. I turn to Amendment No. 36, to which he spoke eloquently. I entirely accept that he was concerned with what I would call, in no derogatory sense, the bottom end of the market, that part which is mainly of benefit to youth clubs and local authorities in some cases, and was not concerned with the more expensive items at the top end of the market. May I say immediately that there would be hardly any loss of revenue at all—the loss would be insignificant—if we were to accept Amendment No. 36.
I could not, and do not, rest my case on loss of revenue. Another factor has to be taken into account. If we were to accept an amendment because it involved very little or no loss of revenue, that would be unfair as between one person and another because it would reduce the tax burden on one person and not on another only because no revenue was produced in the one case and a substantial amount was produced in the other. For that reason we cannot accept the amendment.
Amendment No. 43 relates to spare parts for aircraft. We accept that there is difficulty in relation to aircraft because some are taxed at 8 per cent. and some at 25 per cent. Customs and Excise has seen representatives of the aircraft industry. There have been discussions, and I believe representatives of the trade accept that it will be possible to come to an arrangement to iron out some of the anomalies which now exist in relation to spare parts. I do not think there is a very large gap between the trade and Customs and Excise after their recent meeting, and I am hoping that we can go some way towards meeting the objective of Amendment No. 43 as a result.
10.0 p.m.
I deal finally with the amendment on safety equipment, Amendment No. 41. I accepted in Committee upstairs that certain items—echo sounders, compasses and radar sets— could be said to be safety equipment, although they are navigational aids as well. They fall on a narrow line between navigational aids and safety


equipment. We accepted amendments on those items, and there will be relief in those three cases.
We cannot go any further. I am not convinced that the other items which it is sought to delete could be described as safety equipment. There are other items which on one definition might be called safety equipment. We can go no further than the concessions which I said upstairs we would make, and which will be incorporated in our order.

Mr. Beith: I accept that the Minister might not wish to accept the amendment, but I hope that under the order procedure he will consider certain items which have been mentioned, such as bilge pumps, which are taxed at two different rates. The trade could put before him specific cases, for which he now has a suitable procedure.

Mr. Davies: No doubt the trade will make representations on such matters. We cannot offer a concession in the Bill on the items the hon. Gentleman mentioned. We shall keep the matter under review, and if a case is presented we shall consider it on its merits.

Mr. Lawson: The Minister has talked about the undertaking he gave upstairs. He half-gave an undertaking on Amendment No. 45 in my name, concerning the private pilots' licences course. Will he say something about that?

Mr. Davies: One either gives an undertaking or one does not, and I did not half-give an undertaking. I said that pilots' licences in general and training courses were a supply of services, and, therefore, were taxed at 8 per cent., not 25 per cent. I also said that there was often difficulty of proof, especially in relation to solo flying to obtain a licence. I added that Customs had come to an agreement with the operators of commercial pilots' licences courses, and that there was little difficulty there.
I undertook that there would be discussions with the people who ran the courses for private pilots' licences, to see whether we could come to the same arrangement. It seems that Customs has now reached agreement with the major course operators, and I do not think that there will be a problem, except perhaps in one or two small cases. Where a person pays one sum for the whole

course, one package, the tax will 8 per cent., because he is paying for the provision of services.
We cannot accept the main amendment on boats, because it would involve a loss of revenue. Our figure for that loss is £3 million. I see no reason to resile from that figure. I appreciate that Conservative Members are not concerned about such figures, but they are important for the public sector borrowing requirement, and, therefore. I cannot accept the amendments, and I cannot advice my hon. Friends to support them.

Mr. Nott: I am sorry that the Chancellor of the Exchequer has left, because it would have been instructive for him to remain and witness the poor performance of his Ministers. He would have heard a series of some of the most absurd arguments on the higher rate of VAT put forward again and again tonight.
The debate is the last of many that we have had on the subject of the higher rate of VAT on boats. I hope that we shall achieve the same victory here on behalf of the 2¾ million people who enjoy sailing and rowing as we did on the last amendment on behalf of the 12 million households which hire television sets.
My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who—if I may put it in this way—has taken charge of this matter throughout the proceedings on the Bill, made another excellent speech, as did my hon. Friend the Member for Dumfries (Mr. Monro), who pointed out rightly that the Minister for sport has not been here for any of our debates. As my hon. Friend said, the Government are about to produce a White Paper on recreation, yet, on a matter of considerable importance concerning one of the principal sports in the country, the Minister has not seen fit to nut in an appearance. I am not surprised. He must be extremely embarrassed by what the Treasury is doing.
My hon. Friend the Member for Dorset, West (Mr. Spicer) also made a short but excellent speech, and we have had support from the Liberal Party. No one can know this industry better than the hon. Member for the Isle of Wight (Mr. Ross). We have had unspoken support from many Labour Members, not least the hon. Member for Southampton, Test (Mr.


Gould). The hon. Member for Horn-church (Mr. Williams) supported us in Committee. The hon. Member for Newham, South (Mr. Spearing) has also spoken in this debate.
We can bring our attack on this measure down to a question: why is it that the Government wish to attack recreation? If they wish to attack recreation through the tax system, why is it that they want to single out sailing, canoeing, flying and gliding, and why do they single out dinghy sailing and canoeing for a discriminatory tax? The absurdity of doing so was illustrated in Committee by one of the many admirable speeches made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). I should like to quote two sentences from his speech. He said:
why is it that the Financial Secretary can ride out on to the polo field paying 8 per cent. on his saddle, on his bridle, and on his hoots…why is it that the Chief Secretary can go, I think it is, game shooting and pay 8 per cent. on his sporting rifle? Why is it that perhaps you. Sir Stephen"—
who was the Chairman of our Committee—
may choose to join the Chief Secretary at the coverts side and pay only 8 per cent. on your shotgun and your cartridges?"—[Official Report, Standing Committee H, 24th June 1975; c. 350.]
Yet the 2¾ million young people who actually sail a canoe and row for their recreation will have to pay 25 per cent. on their particular hobby. Polo sticks—no; Holland and Holland and Purdy's—they all go free. No, it has to be the canoe, boat and the small dinghy sailors who bear a 25 per cent. rate. But the big game shooters like the Chief Secretary all go free—they just pay 8 per cent. on their sports.
The inherent nonsense of Schedule 7 has been demonstrated again and again in our debates. Apparently, the way the Government have proceeded is to find out those sports and recreations which give the most pleasure, particularly to widows and elderly people; for example, the rental of television sets. They have singled out—for no apparent reason—all the items which will cause the most distress and upset, and put a 25 per cent. rate on them.
I turn to the reply of the Minister of State. He said that we hear too much

about the threatened severe unemployment situation in the industry. He said that the industry is concerned with boats that are zero-rated.

Mr. Denzil Davies: I said that 10,000 people are concerned with boats affected by the 25 per cent. rate and the balance are not.

Mr. Nott: The balance of the builders would not be affected because the boats they build are either exported or are fishing boats and, therefore, are zero-rated. The Government seem incapable of understanding that the vast majority of boatyards are building both kinds of vessel. In my constituency in the West Country, which must be one of the largest boat-building areas in the country, the boatyards are not just building a large number of dinghies or boats for pleasure, but the majority are building fishing boats, boats for export and boats for sale in the home market. If we shut down the home market by imposing a discriminatory rate of 25 per cent. VAT on those boats, the overheads of the business will go to pot and it will veer towards bankruptcy.

Mr. Beith: If the boatyards in the hon. Gentleman's constituency are anything like those in my constituency, he will probably find that they used to build fishing boats but are now being dealt a double blow because when the fishing industry is in such a crisis that boats are not being built they are having the only other string to their bow, the only other side to their market, hit in this way.

Mr. Nott: That is probably right, but I should not be drawn into the question of the oil subsidy at this stage.
The Minister of State gave us a number of calculations which had been produced to him about the level of the drop in the trade since the Chancellor made his announcement. I do not know where those figures came from. My hon. Friend the Member for Weston-super-Mare told us that 44 members of the trade federation have resigned or gone into receivership in the last quarter, which is two or three times the number in any previous corresponding period. The hon. Member for Isle of Wight (Mr. Ross) gave innumerable examples. The examples I gave in Committee stem straight from the


Ship and Boatbuilders National Federation, which has said that between 1st and 15th June this year—long after the Chancellor's announcement in the Budget—as opposed to the comparable period last year, weekly orders were down by 72 per cent. and monthly inquiries had decreased by 73 per cent.
Where is this figure of 10 per cent. obtained from if it is not obtained from the very people who build the boats? Any hon. Member who has a boatyard in his constituency or has talked to anyone interested in the dinghy-building industry or canoe-building industry must know perfectly well that this measure has brought a very serious crisis indeed to the small boat industry. The number of unemployed in this industry is increasing very rapidly.
We want to bring the debate to a conclusion, so I shall not cover the point on flying and the Government's concessions, although we welcome those. I conclude by commenting on the Minister of State's remarks about the public sector borrowing requirement and its relationship to this amendment.
To hear the Minister of State talking about the borrowing requirement is really like hearing Satan rebuking sin. We have put forward our proposals very clearly and have made it absolutely clear that without the higher rate and with a 10 per cent. rate across the board the Government would have raised more revenue. It is no use the Minister saying that it is perfectly right and proper for a Socialist Government to discriminate against 2¾ million people who enjoy dinghy sailing at the weekends and to help the polo players and pheasant shots, back at the 8 per cent. rate. It is no use his saying that polo is all right and dinghy sailing is not. It is no use his saying that we cannot afford to lose another £1 million, or whatever it is, off the borrowing requirement.
Government expenditure since the present Government came to office has increased by £20 billion—not £20 million but £20 billion; £20,000 million. That

is in money terms. In real terms Government expenditure has increased over t ht. last 18 months by £4,000 million. That is more than the entire defence budget and is approximately the same amount as the cost of the present social security system and the personal health and social services system. That is the amount by which Government expenditure has increased in 18 months.

The Minister of State tells us now that we should not stand up for 12 million people who hire television sets and 2¾ million people who enjoy dinghy sailing. What he should say to his right hon. Friend the Chancellor is this: "Why do we not let these extra 2¾ million people continue to carry on with their sport as cheaply as the polo players and the shooters, and as cheaply as the Chief Secretary during his game-shooting expeditions in Africa during the long Summer Recess? Should not we let them go on having their dinghy-sailing at no greater expense to them? In return, what we should do is not go ahead and spend £1,000 million in relation to the North Sea and £500 million, or whatever it is, on land nationalisation and another several hundred million pounds on nationalising the shipbuilding and aircraft industries".

These are all matters which the 2¾ million people who go sailing most weekends in the summer months do not want one little bit. They simply want to go on sailing and enjoying themselves at the weekend. The Government, who have increased public spending by £20 billion in 18 months, should not tell us that we cannot help the 2¾ million people who want to go sailing at the weekend. That would be a very poor and weak argument.

I must ask my hon. Friends to divide on this amendment, and I hope that we shall have the same number of abstentions as we had on the last amendment.

Question put, That the amendment be made:—

The House divided: Ayes 105, Noes 120.

Division No. 288.]
AYES
[10.16 p.m.


Arnold, Tom
Bottomley, Peter
Cope,John


Atkins, Rt Hon H. (Spelthorne)
Brotherton, Michael
Corrie, John


Bain, Mrs Margaret
Butler, Adam (Bosworth)
Crawford, Douglas


Beith, A. J.
Carlisle, Mark
Crowder, F. P.


Berry, Hon Anthony
Chalker, Mrs Lynda
Dean, Paul (N Somerset)


Biffen, John
Cockcroft, John
Drayson, Burnaby




Durant, Tony
MeCusker, H.
Silvester, Fred


Dykes, Hugh
Macfarlane, Nell
Sims, Roger


Edwards, Nicholas (Pembroke)
Maxwell-Hyslop, Robin
Sinclair, Sir George


Emery, Peter
Meyer, Sir Anthony
Smith, Dudley (Warwick)


Ewing, Mrs Winifred (Moray)
Mitchell, David (Basingstoke)
Speed, Keith


Eyre, Reginald
Moate, Roger
Spicer, Jim (W Dorset)


Fairgrieve, Russell
Monro, Hector
Stewart, Donald (Western Istes)


Fisher, Sir Nigel
More, Jasper (Ludlow)
Stradling, Thomas J.


Gardiner, George (Reigate)
Morgan, Geraint
Taylor, R. (Croydon NW)


Goodlad, Alastair
Morrison, Charles (Devizes)
Tebbit, Norman


Grant, Anthony (Harrow C)
Nelson, Anthony
Temple-Morris, Peter


Grieve, Percy
Neubert, Michael
Thompson, George


Griffiths, Eldon
Newton, Tony
Trotter, Neville


Grimond, Rt Hon J.
Nott, John
Tugendhat, Christopher


Hannam, John
Page, Rt Hon R. Graham (Crosby)
van Straubenzee, W. R.


Hawkins, Paul
Pardoe, John
Vaughan, Dr Gerard


Higgins, Terence L.
Parkinson, Cecil
Wainwright, Richard (Colne V)


Hordern, Peter
Penhaligon, David
Wakeham, John


Howe, Rt Hon Sir Geoffrey
Perclval, Ian
Wall, Patrick


Howell, David (Guildford)
Powell, Rt Hon J. Enoch
Warren, Kenneth


Kershaw, Anthony
Rathbone, Tim
Watt, Hamish


King, Evelyn (South Dorset)
Rees, Peter (Dover &amp; Deal)
Weatherill, Bernard


Kirk, Peter
Reid, George
Wiggin, Jerry


Knox, David
Ridley, Hon Nicholas
Wilson, Gordon (Dundee E)


Langford-Holt, Sir John
Rippon, Rt Hon Geoffrey
Winterton, Nicholas


Lawrence, Ivan
Ross, Stephen (Isle of Wight)
Young, Sir G. (Ealing, Acton)


Lawson, Nigel
Rossi, Hugh (Hornsey)



Le Merchant, Spencer
Salnsbury, Tim
TELLERS FOR THE AYES:


Luce, Richard
Shaw, Giles (Pudsey)
Mr. W. Benyon and


MacCormick, Iain
Shelton, William (Streatham)
Mr. Michael Roberts.


McCrindle, Robert






NOES


Anderson, Donald
Grant, George (Morpeth)
Rodgers, George (Chorley)


Atkinson, Norman
Hamilton, James (Bothwell)
Rooker, J. W.


Barnett, Guy (Greenwich)
Hamilton, W. W. (Central Fife)
Roper, John


Barnett, Rt Hon Joel (Heywood)
Hardy, Peter
Ryman, John


Bates, Alt
Harper, Joseph
Sandelson, Neville


Blenkinsop, Arthur
Harrison, Walter (Wakefield)
Sheldon, Robert (Ashton-u-Lyne)


Boardman, H.
Hayman, Mrs Helene
Short, Rt Hon E. (Newcastle C)


Booth, Albert
Heffer, Eric S.
Short, Mrs Renée (Wolv NE)


Brown, Hugh D. (Provan)
Hooley, Frank
Silkin, Rt Hon John (Deptford)


Butler, Mrs Joyce (Wood Green)
Horam, John
Silverman, Julius


Campbell, Ian
Hughes, Rt Hon C. (Anglesey)
Skinner, Dennis


Canavan, Dennis
Hughes, Mark (Durham)
Small, William


Castle, Rt Hon Barbara
Irving, Rt Hon S. (Dartford)
Smith, John (N Lanarkshire)


Clemitson, Ivor
Jenkins, Hugh (Putney)
Spriggs, Leslie


Cocks, Michael (Bristol S)
John, Brynmor
Stallard, A. W.


Cohen, Stanley
Jones, Dan (Burnley)
Stewart, Rt Hon M. (Fulham)


Coleman, Donald
Kaufman, Gerald
Summerskill, Hon Dr Shirley


Cox, Thomas (Tooting)
Kilroy-Silk, Robert
Taylor, Mrs Ann (Bolton W)


Craigen, J. M. (Maryhill)
Lamborn, Harry
Thomas, Mike (Newcastle E)


Cunningham, Dr J. (Whiteh)
Leadbitter, Ted
Thomas, Ron (Bristol NW)


Davidson, Arthur
Lyons, Edward (Bradford W)
Tierney, Sydney


Davies, Denzil (Llanelli)
MacFarquhar, Roderick
Tinn, James


Deakins, Eric
Mackenzie, Gregor
Urwin, T. W.


Dormand, J. D.
McMillan, Tom (Glasgow C)
Walker, Harold (Doncaster)


Dunn, James A.
Madden, Max
Walker, Terry (Klngswood)


Dunwoody, Mrs Gwyneth
Marks, Kenneth
Ward, Michael


Eadie, Alex
Meacher, Michael
Watkins, David


Edge, Geoff
Mellish, Rt Hon Robert
Watkinson, John


Edwards, Robert (Wolv SE)
Mikardo, Ian
Weitzman, David


Ellis, John (Brigg &amp; Scun)
Miller, Dr M. S. (E Kilbride)
Wellbeloved, James


Ennals, David
Mitchell, R. C. (Soton, Itchen)
White, Frank R. (Bury)


Evans, Fred (Caerphilly)
Moonman, Eric
Whitehead, Phillip


Evans, Ioan (Aberdare)
Mulley, Rt Hon Frederick
Williams, W. T. (Warrington)


Evans, John (Newton)
Newens, Stanley
Wilson, Alexander (Hamilton)


Flannery, Martin
Noble, Mike
Wise, Mrs Audrey


Forrester, John
Ogden, Eric
Woodall, Alec


Fraser, John (Lambeth, N'w'd)
Ovenden, John
Wrigglesworth, Ian


Freeson, Reginald
Palmer, Arthur



Garrett, John (Norwich S)
Pavitt, Laurie
TELLERS FOR THE NOES:


George, Bruce
Prescott, John
Miss Margaret Jackson and


Gilbert, Dr John
Radice, Giles
Mr. David Stoddart.


Gould, Bryan
Richardson, Miss Jo

Question accordingly negatived.

Clause 24

CHARGE OF INCOME TAX FOR 1975–76

Mr. Newton: I beg to move Amendment No. 118, in page 18, line 23, after 'more', insert
'or that she is a widow whose deceased husband had previously received this relief on grounds of age'.

Mr. Speaker: With this we shall take Amendment No. 120, in clause 30, page 20, line 6, after 'upwards', insert
'or by a person who proves that she is a widow whose deceased husband had previously received the additional relief provided by this sections '.

Mr. Newton: These amendments arise from two concerns which I have pursued throughout the stages of this Bill in the House and Committee. The first concerns the position of widows. I moved amendments in Committee and in the House to give an additional personal allowance to widows, especially those who are now at work. I should have pressed those amendments on Report if they had been selected.
Secondly, I am concerned with the situation of retired women of over 60 who do not receive the same benefits as retired men. Women must wait until they are 65 before they attract the benefits received by other elderly people under the tax system. Under the National Insurance Scheme the retirement age of women is 60. I argue that women should be treated favourably from the age of 60 under the provisions of the tax system, which purports to help retired people. Both those claims are just, and I hope that we shall have an opportunity to press them at another stage.
It is appropriate to place the position of widows on record. Speaking in Committee on 26th June the Minister of State said:
There is a single person's allowance, a married couple's allowance and in between there is the widow who has many of the liabilities of the married couple. She falls somewhere in between."—[Official Report, Standing Committee H, 26th June 1975; c. 557.]
That is perhaps a slightly Delphic statement, but it is an explicit recognition that the widow has a special position which is not properly recognised by the tax system.
10.30 p.m.
I hope that those remarks made by the Minister of State mean that the Government will think about the problem between now and next year, especially about the proposal which I put forward for an additional allowance for widows who are at work to deal with the grave injustice they feel and the considerable disincentive they experience because of the way they are affected by the tax system. That is incidental to the amendments we are discussing.
In one sense the two amendments bring together the concern about widows and the concern about the treatment within the tax system of women over 60. We are talking about the clause which gives an additional exemption from investment income surcharge for people over 65 and, in respect of Amendment No. 120, the clause which gives an additional personal allowance to people over the age of 65.
I am concerned about a matter that I had not fully registered when we discussed this subject upstairs, but it has since been drawn to my attention. A woman of under 65, whose husband is over 65 and qualifies for these reliefs, also qualifies for them as part of the family. Relief will be given from the investment income surcharge, and an extra age allowance will be given. But suppose the husband dies. The widow will experience all the normal problems of widowhood, and in addition, will find that her tax liability has substantially increased because no one in the family is over 65. She loses those tax advantages at the very time she most needs them.
Neither I nor my hon. Friends wish to press the amendments, which may be defective. I can see other ways of tackling the problem. The amendments continue the benefit for the widow, whatever her age, provided that the husband qualified for them before he died. It could be argued that this advantage should be confined to widows who are already over 60 rather than to all widows. It could be argued that it should be extended not merely to women whose husbands had survived long enough to attract the additional benefits but to cases where the additional benefits would have been attracted had the husband lived.
I have in mind a letter which has come to me not from a constituent but from another source, which reads as follows:
Last year I became an old-age pensioner on reaching 60, and in the same year became liable for investment income surcharge when the level upon which this is levied was reduced to £1,000. Had my husband survived he would have been 67, and we should have been exempt from this reduction in the level of the income so taxed.
I see the difficulties of this, but it is in many ways a valid point. I can perhaps back it up by quoting further from the letter, which shows clearly how some people who are affected by these problems feel:
In effect our savings of my husband's working years are being taxed, as far as I am concerned, six times—income tax and surtax paid during his lifetime, estate duty and the capital gains tax charged on the investments realised to pay the estate duty, the income tax I pay which is deducted at source, and now the surcharge. At a time when inflation has eroded the value of the investment income, increased the actual cost of direct taxation and increased also the basic cost of the inescapable necessities of life…it seems to me that a widow who has paid estate duty should be treated for investment surcharge purposes as if her husband were still living if he would have been eligible for relief, and if she herself is an old age pensioner".
The letter then deals with the difficulties of this lady's situation. It is a point worth considering whether a woman who is living on the investment income from her husband's estate, having paid estate duty, should qualify for the extra relief under the investment income surcharge which would have been obtainable had her husband lived.
Further, one could argue that the concession that I am proposing should be extended to widowers who had wives older than themselves and would have attracted relief in that way. With the world as it is, and with the practical realities of our society, this problem is primarily likely to affect women. That is partly because they are normally younger than their husbands and partly because women tend to outlive men by some distance, as anyone who has been into an old people's home will have had no difficulty in observing. This is an issue worth exploring, and in particular in terms of the amendments. I shall very much welcome the observations of whichever Minister replies.

Mr. Anthony Nelson: I rise briefly to support the amendment moved so eloquently by my hon. Friend the Member for Braintree (Mr. Newton). I believe that the amendment particularly affects constituencies such as mine, which have a larger than average proportion of elderly people living in them. I shall be interested to hear from the Government some estimate of the cost that an alleviation of the proposals contained in the Bill would represent. I imagine that it would be a fairly minimal sum, although the benefit would be considerable.
It seems from the constituency mail that I receive that many people suffer substantially from the higher tax which is payable on the loss of a member of the family, bearing in mind that their outgoings and their gross incomes do not change substantially. I could quote many examples which are similar to those that have been outlined by my hon. Friend. I know of one lady who had to replace a cistern tank in her house at a cost of £150. Those are the sort of outgoings that must be considered in terms of high taxes that eat into fixed incomes. This is a fairly minimal request that we make of the Government to assist a hard-pressed section of the community.
I take this opportunity of briefly saying in a wider context that I greatly regret the fact that we are asking the elderly and those with slender savings incomes to bear the cost of the profligacy of the current generation of politicians. I do not include only the present Government in that category. Emotive words such as "estate" and "investment income" often hide the fact that people have throughout their lives worked hard and done without many things to ensure that they have some minimal savings to live off during their retirement. They do so so that they can provide for themselves without recourse to the State, so that they can ensure that they can provide their own health services, for example, without having to turn to other people.
I know that this has been said before but it is worth reiterating from my part of the world. I strongly believe that we should encourage such attitudes. It is surely healthy to encourage people to provide for themselves and to return to some of the Edwardian virtues of hard work and thrift. I believe that in days when credit is the smart thing to have


there is precious little encouragement for people to save, and there will be even less if legislation of this sort is enacted. I hope that the amendment will be pressed.

Mr. Robert Sheldon: A number of amendments have touched upon the problems of widows, and the proposals have tended to follow a similar pattern. They have first drawn attention to the problems and then tried to alleviate the situation in not dissimilar ways by trying to obtain financial compensation.
We approach the problem of widows knowing that no financial compensation is adequate for the loss that has been sustained. Therefore, it is difficult to deal with the financial problems on their merits and try to divorce them from the practical problems of the sacrifice and sense of loss which has been sustained.
Amendment No. 118 deals with the concession governing investment income surcharge. It is a principle of our tax system that the husband's and wife's income is aggregated and considered to form that of one household, and that social unit is taxed as an entity in itself. As that entity changes, so the taxation also changes. Increasingly in these discussions we shall have to examine the situation of the widower, whose needs perhaps we have tended to ignore in the past. It is wrong to extend sympathy to the one without extending it to the other. Therefore, we try to bring about changes which will help them both.
My view is—and I have said this on a number of occasions—that any money available is best used through the social security system. That directs most resources to those who have the most grevious problems. That will be my continued approach to these problems.

Mr. Beith: The Minister said that he preferred to see money being used to the best advantage through the social security system, and perhaps that remark should not go unchallenged. Will he consider the situation of widows who try to undertake part-time jobs to bring about some earnings for themselves and to gain some self-respect, but then find themselves brought up against the tax threshold? They cannot understand the justice of a situation in which they seem to be worse off than those who depend wholly on what the State can provide.

Mr. Sheldon: I did not refer to this as the only area in which to direct funds for those in greatest need. I am not saying that other requirements should be overlooked.
The problems of widows with children are among the most acute. Here we have brought about—I say this with some pride—a really most astonishing increase, given our economic situation, whereby the additional allowance has now shot up to £280 from what it was. This is very valuable and is much appreciated by those with the most severe problems, not only of distress but of need as well
10.45 p.m.
Perhaps I may say something about Amendment No. 120, which deals with the age allowance and would extend the benefit of the age allowance to a widow under 65, if her deceased husband had previously been entitled to the allowance because he was over 65. There are two kinds of comparison that we are making here. The comparison that the hon. Member for Braintree (Mr. Newton) sought to make, and the comparison that the hon. Member for Chichester (Mr. Nelson) also sought to make, was between the position of the wife at the time when her husband was alive and the position it subsequently became following his death. One can see that that is a matter where it has changed obviously to her disadvantage, but there is another comparison that one also has to make, and that is between this widow and another person of a comparable age and circumstances who is separated, perhaps under very tragic circumstances, or who is single or divorced. A variety of circumstances can exist and lead to many problems. There is also the problem of the widower. That is another comparison that the House has to take into account in order to achieve a fair balance, and that must be our aim.
There is one problem that this amendment would bring about were it to be enacted. It would provide an age allowance to a widow younger than her husband, who had to be over 65 to get this benefit. This would apply irrespective of the age of the widow. I fail to understand why a young widow—to take an extreme case, it could be a very young widow, even in her twenties, or any widow much younger than her husband


—should obtain this particular advantage by comparison with, say, the widower to whom I was referring or the single or separated or divorced person. It is very hard to say why such a person should qualify for this advantage by comparison with others.
We can well understand the need to do more as time goes on, as we are able to identify the problems, and as more money, one hopes, becomes available. I do not think it is in that way suggested that we are able to provide the greatest help but rather in the other ways that I have indicated. For these reasons I cannot accept the amendments.

Mr. Newton: I am rather disappointed, not so much by the fact that the Financial Secretary does not feel able to accept the amendments, which I entirely understand, but by the general way in which he has replied. It is no good his expostulating. He might wait until he has heard what I have said.
The first part of his argument was almost entirely directed to amendments which we discussed in Committee and not to this one at all. I am not talking at the moment about providing widows with some financial compensation, as he put it, in respect of their widowhood. I am trying to get at the specific case of a widow who finds that she is financially penalised as a result of her husband's death because he had got into the age group where he was attracting these extra reliefs and, in effect, those reliefs disappear on the same income which is by then the widow's income. It is very difficult to defend a situation in which a married couple have been getting certain tax advantages, the husband dies, and his widow loses those advantages. I do not believe that anyone can find that a satisfactory situation.
I cannot think that the Financial Secretary did me the courtesy of listening to my arguments. I said that there might be a good case for confining this concession to widows over the age of 60. I accept the problem of the very young widow which might arise. Equally, I can see the point about widowers, although in a practical world this is more likely to affect widows.
I do not think that there is a great deal between me and the Financial

Secretary. But I wish that he had been a little more forthcoming in acknowledging the indefensible situation of the widow who is perhaps herself past retirement age but loses benefits because she has not reached the age of 65 when her husband dies over the age of 65. That is very difficult to defend. I know that the Financial Secretary is a sympathetic man, and I hope that he will give further thought to this matter over the next year or so.
With those remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32

EXEMPTION OF NON-CONTRIBUTORY INVALIDITY PENSION

Mr. Newton: I beg to move Amendment No. 57, in page 20, line 37, after 'words', insert 'mobility allowance'.
The purpose of the amendment is to make the mobility allowance, which is in course of being introduced for disabled drivers and others, tax-free instead of taxable as the Government propose.
I understand that the mobility allowance provided for in recent social security legislation is intended to be a £5 a week taxable allowance for disabled people of working age and children aged five or over who are unable, or virtually unable, to walk. As it is phased in, it will replace partly a number of existing allowances and arrangements for helping with the mobility of the disabled, and partly it offers an alternative, because I understand that the existing invalid tricycle will continue to be an option for those who prefer to take that rather than the new cash allowance. It also extends help for this category of people to rather wider groups than those covered by the existing provision for helping the immobile disabled. I think that in principle it is generally welcomed on all sides.
What is at issue on this amendment is not whether it is a good idea, although we might argue about some of the details. It is whether it should be taxable or tax-free. As I say, the purpose of the amendment is to make it tax-free rather than as the Government intend, taxable.
I am encouraged to see that the Minister of State is to reply to this debate, because I want to say a few words about


a brief exchange which he and I had in the "Clause stand part" debate in Committee. The hon. Gentleman made some play of my alleged want of principle in having moved some amendments to make things taxable and others making things tax-free. I thought that that was a little hard, bearing in mind that it is not open to the Opposition to move amendments making things taxable. To make things tax-free or to reduce taxation is the only way that we have to raise matters in amendments to the Finance Bill.
In order to avoid the hon. Gentleman going over the argument about my principles, perhaps I might explain that, in general, I think that in an ideal tax and social security system there is a great deal to be said for all benefits being taxable, provided that it is part of a wider reform like a tax credit scheme, of which I am a supporter.
Meanwhile, we have to deal with the tax and social security system as it is, and at times it seems to be verging on a shambles. In this context, virtually all benefits for the disabled are tax-free. This is one of the few which are to be taxable. In other words, we are discussing not my principles, but, as it were, the Minister's, the Treasury's or the DHSS's principles. But on what principle is it that most benefits to the disabled are tax-free and this one is to be taxable? That is the primary point that I am trying to get at.
Upstairs the Minister had two main arguments. To be fair, he had to deploy them somewhat hastily because I raised the matter unexpectedly in the "Clause stand part", debate, not on a formally tabled amendment.
The first argument was that the new mobility allowance would replace a smaller tax-free allowance. That is true to some extent, although the previous smaller tax-free allowance had a much narrower coverage than the new mobility allowance. The fact that it replaces a smaller allowance and that, therefore, because the allowance is larger it is reasonable to tax it does not seem to me to hold up. It would depend on the figures. It would need to be a larger allowance to cover the addition of motoring, travel and transport costs, apart from anything else. I do not attach much importance to that argument, unless it is

backed by figures showing that it is still more generous and other figures showing that it is reasonable to tax it in relation to its impact on different people.
The second argument was that it would give more help to those with smaller means or, as it were, that it would give less help to the better off. That is a fairly standard argument that we have heard from the Minister of State and other Treasury Ministers on a number of points. I put it to the hon. Gentleman that that is not so in the case of this mobility allowance in the context of the treatment of disabled people.
The fact is that war disablement pensions, industrial injury benefits, both contributory and non-contributory, and invalidity pensions are non-taxable. What is more, they vary in amount according to where, when and how one becomes disabled. Therefore, the tax-free base for a disabled person varies enormously in an almost random way and is not systematic.
It follows that the effect of adding a taxable allowance on top of this strange and incoherent system has random effects on different types of people. Because they are receiving different tax-free incomes from different sources but will receive the same mobility allowance, the tax effect on them may be quite different.
Other similarly disabled people who are in work and, by definition, will be paying tax, assuming that they are over the tax threshold, may be getting less than other disabled people in tax-free benefits but paying the full basic rate of tax on their mobility allowance, thereby substantially reducing its value to them. That means that there is no necessary correlation between the amount of help which this measure will give and the income or means of the person to whom it is being provided.
11 p.m.
I should like to make certain other points. The first is a simple straightforward comparison—I suppose this is the nearest analogy one can get—with the mobility allowance, namely, the attendance allowance introduced by the previous Government. In broad terms we have one allowance which is aimed at those who are disabled in a way which means that they need a great deal of looking after, and that is tax-free, and another allowance which is aimed at dis-


abled people who need special help with getting about, and that is to be taxable.
I can see no conceivable basis on which that distinction within the tax system is to be drawn. I strongly suspect the answer to be that the Treasury was simply feeling in a more generous mood when the attendance allowance was being introduced some years ago than it is feeling at the moment when the mobility allowance is being introduced. I understand Treasury worries about taxation and borrowing requirement and all the rest in the present context, but that does not seem to be a good argument for this distinction between different types of help for disabled people.
If it is accepted that some disabled people, on no systematic basis, will receive significantly less benefit from this allowance than others, I take it the Minister will accept that any disabled person paying basic rate of tax on a full mobility allowance derives much less benefit than before. According to figures I have been given, the mobility allowance fully taxed at the basic rate will not—by some way—even cover the tax costs in motoring for a person of this sort.
I have figures which suggest that actual tax costs—not the total costs—of VAT. car duty on a vehicle, petrol duty and other taxes which have to be taken into account in running quite a small car fitted for a disabled driver will be between £195 and £215 a year, and that, while it is taxable, the mobility allowance will provide £169, which is considerably less. It will, therefore, not even cover the tax costs.
I have no time to go through a further series of figures, but I would simply say that on a calculation I have been given by one organisation particularly concerned with the needs and interests of the disabled, the mobility allowance would have to be about £200 tax-free to provide some advantage to those receiving one of the existing benefits, the tax-free private car allowance.
Ministers should review the intention to make the benefit taxable in the light of the questions I have raised and because the new allowance will not even cover the tax costs in some cases, nor compensate other people for the increase in their motoring costs, compared with what the

present private car allowance was worth when it was introduced. The situation at the least seems to be a muddle. I hope that Ministers will be able to consider it.
It would be sensible if I said something more about points put to me by the Joint Committee on Mobility for the Disabled, because a lot of people are affected by this. There is the situation of the disabled passengers, unable to transfer from a wheel-chair to the passenger seat of an ordinary car, who therefore cannot use hire cars. They have to have specially adapted vehicles if they are to enjoy mobility outdoors at all. People in that situation are forced to resort to private motoring and cannot use taxis.
The mobility allowance is unlikely to pay anything like the extra costs which will be imposed by the need to provide private motoring. There are cases where the new mobility allowance will not come close to the tax element in private motoring.
I might touch on the figures I have been given about total costs of running a car for the disabled driver now by comparison with the situation when the private car allowance of £100 a year was introduced in 1972. The cars in the table before me range from the Mini-type, of less than 1,000 cc, up to cars of 1,500–2,000 cc, in each case with various adaptations. In 1972 a Minivan conversion cost about £460 to run for 10,000 miles a year. It is now costing nearer £900, or nearly double. For the larger vehicle, of 1,500–2,000 cc, the 1972 figure was about £670 a year, and it is now substantially more than £1,100. The increase is not proportionately so large, but it is still substantial in absolute terms.
Compared with the value of the private car allowance in 1972, the mobility allowance now needs to be about £200 a year tax-free to provide the same amount of mobility for the people affected. That is a significant figure, with which the £169 of the new mobility allowance compares unfavourably. That £169 is what the allowance is worth to anyone who is forced to pay tax on it at the basic rate of 35 per cent.
Can the Minister justify his argument advanced in Committee upstairs, which I acknowledge was used in some haste,


that by making the new mobility allowance taxable he is making sure that the maximum amount of help goes to those most in need? The existing variation in taxability of various benefits to the disabled and, above all, the fact that the benefits vary greatly, according to how and when and in what circumstances the disablement occurs, mean that he cannot be sure of that. The effects are likely to be random. In particular, they could be unfair to disabled people who are not sufficiently disabled to be unable to work and are, therefore, in earning employment and likely to pay full tax on the full value of the mobility allowance.
Why is the attendance allowance tax-free and the mobility allowance taxable? I can see no principle or common sense in that.
I understand that as part of the changeover the Government intend to withdraw the existing concession on the vehicle excise duty for disabled drivers. It has been suggested to me that that intention has been stated, but I have been unable to check. It would be a very mean-minded action. I hope that the Minister can assure me that it will not be taken, and that he will respond reasonably favourably to what I have said.

Mr. Graham Page: My hon. Friend the Member for Braintree (Mr. Newton) has put forward an unanswerable case. Of course, one is grateful for the mobility allowance, which is very beneficial and has filled a gap in the relief which should be given to the disabled. But I have always understood it to be a general principle that the benefits to the disabled are untaxed.
I have always complained about this when I have pleaded in the House for tax-free pensions to war widows. I have said that if a person survives and is merely disabled his pension is tax-free, but if he dies the pension to his dependants is charged to tax. To that extent I think it rather unfair to the dependants of those who suffer death that there should be this distinction. However, there has been that distinction between benefits payable to those who suffered war injuries or industrial injuries and pensions arising from death. Certainly the closest case to this is the benefit known as the attendance

allowance, as my hon. Friend the Member for Braintree has said.
The mobility and attendance allowances are similar allowances. In the case of the attendance allowance the benefit is tax-free, but in the case of the mobility allowance it has to be taxed. Some strange logic has been put forward by Treasury Ministers during the argument on this subject. It is said that the mobility allowance is a larger allowance to take the place of something that was rather smaller. Because it has been increased, that is supposed to take into account the fact that it is taxable. This is not a good argument to break a principle. I ask the House to retain the principle which has been recognised over many years, that benefit to those who have been disabled should be tax-free, and to agree that in the case of the mobility allowance that principle should be fully recognised.

Mr. Denzil Davies: The hon. Member for Braintree (Mr. Newton) asked me one specific question about the vehicle excise duty concession to which I do not know the answer. I will find it out and write to him. I do not know whether or not it is intended to withdraw it, but I will let him know.
I turn to the main point which he and the right hon. Member for Crosby (Mr. Page) raised; namely, the fact that the mobility allowance is to be taxed. It is to be taxed because of a conscious decision by the Government. We have decided that the fairest way of ensuring that those in greatest need get the most benefit under this mobility allowance is to tax it. Therefore, those who pay little or no tax will benefit more than those who have higher incomes and pay a greater amount of tax. That is a conscious decision by the Government.
We accept entirely that there are anomalies in this area. I do not accept that it is a matter of principle that benefits to the disabled are not taxed. Many of the benefits are analogous to sickness benefits—for instance, the non-contributory invalidity benefit. It was believed right that this benefit should not be taxed because sickness benefit in general is not taxed. If we were starting again—and I believe that the hon. Member for Braintree would agree with me—the system should be to tax most of these benefits


on the principle that then we would ensure that the benefit went to the person in greatest need. This new mobility allowance goes some way towards that principle.
I concede that the attendance allowance cannot be argued to be different from the mobility allowance, and under the previous Conservative administration it was decided that it should not be taxed. That might have been an anomaly. It could well have been argued that the attendance allowance should have been taxed on the same principle.
In relation to the mobility allowance, we are introducing the principle that it is better and fairer that these payments should fall into the taxable brackets. It could be argued that £260 is not high enough and that it should be £300 or £400. However, that still does not destroy the argument that on the ground of fairness these payments should be taxed so that the greatest amount goes to those in greatest need.

Mr. Graham Page: Is the hon. Gentleman saying that because the mobility allowance is to be taxed it would be right to tax the other benefits received by the disabled? He cannot have it both ways. Is he putting forward the frightening proposition that the Government believe that all disability benefits should be taxed?

11.15 p.m.

Mr. Davies: No, I made my position quite clear. I said that if we were starting again with a new system, one might very well go along with the principle that all benefits of this kind should be taxed. But we have a system in which there are anomalies. Many of these benefits are not taxed, and there is no intention to tax them. But now we are introducing a new mobility allowance which covers a wider field than the old £100 cash mobility payment for private car owners, or payment in lieu of the provision of an invalid vehicle. This is a much wider benefit and covers a wider range of people. After tax at the standard rate of 35 per cent., the person who receives this allowance is still better off—compared with the £100 he would have received previously—to the tune of £69 a year. The mobility allowance extends the benefit further. It is a greater benefit despite the fact that it is taxed, because

even at the standard rate of tax a person is still better off. If a person is in the higher realms of tax or the higher bands of investment income surcharge, the position is different.

Mr. Newton: Will the hon. Gentleman explain why the much more major new benefit which is about to be introduced, the new child benefit, is to be tax-free?

Mr. Davies: I would not wish to be drawn into that point. As I said, there are anomalies in these matters. But it was decided that because the mobility allowance was a new allowance covering a wider range of people at a higher rate than the previous allowance, it would be fairer in these circumstances—and I think that the hon. Gentleman would go along with the principle—to provide that these payments should be taxed, so that those at the lower end of the scale get greater benefit and those who pay tax on their income and have higher incomes receive a lower benefit as a result.
That may not satisfy the hon. Gentleman, as may not the level of the payment, but I think that the principle is right. That is why the Government have decided that the mobility allowance should be taxed.

Mr. Newton: The Minister of State obviously appreciates that I am thoroughly dissatisfied by that answer, which does not stand up at all. Many of us would agree that if we are starting afresh with a completely new tax system, we would make all the benefits taxable. However, what cannot be defended is the use of that argument as the basis for making one benefit taxable in isolation, when not even the Minister of State can pretend that it hangs together with the rest of the sysem.
If the Minister wants to establish a new principle in the system, he should not come forward with bits and pieces, putting one bit on such-and-such an allowance and doing something else with another. He should come forward with a proposal for reform—what my hon. Friends were working towards with the tax credit system—for which we have been waiting in vain for a considerable time. That is one basis on which I am not satisfied.
I am not prepared to have this maverick allowance thrown into a different


status in the tax system on the basis of no principle whatever in relation to the rest of the existing benefits and the tax system. Not even the Minister of State has been able to identify any principle which holds the treatment of this particular benefit in line with any other existing benefit or the other major new benefit which the Government are proposing.
As I said earlier, it is not my principles which ought to be in question but those of Labour Members. It is absolutely clear that on this matter there is no principle which justifies it in terms of the system as a whole.
Secondly, the fact that the allowance, even if it is fully taxable, will be worth more than the old private car allowance seems neither here nor there. The point is that if it is taxable it will be worth less in real terms to those who pay tax on it than the old tax-free allowance, because £169 after tax, at today's motoring costs, is less than £100 tax-free at previous motoring costs.
If it is the Government's intention to bring about a real reduction in the value of help between groups of the disabled, well and good. That is what is being done, although the Minister has not acknowledged it. His answer was profoundly unsatisfactory. I do not blame him; he was not in the Treasury when this was cooked up and he has been given an indefensible brief. He has my sympathy but he cannot expect my support.

Amendment negatived

Clause 33

STOCK DIVIDENDS

Mr. Joel Barnett: I beg to move Amendment No. 58, in page 20, line 39 leave out "subsection (9)" and insert "subsections (9) to (11)"

Mr. Deputy Speaker (Mr. George Thomas): With this amendment, we can take Amendment No. 61.

Mr. Barnett: These amendments remove what could amount to a retrospective or double charge to tax under Clause 33 as drafted. We had a debate on this matter during the Standing Committee proceedings and I hope that the hon. Member for Horsham and Crawley (Mr. Hordern), who asked me to deal with this

point, will be satisfied with the amendments.

Amendment agreed to.

Mr. Joel Barnett: I beg to move Amendment No. 59, in page 23, line 17 after "to", insert (a)".

Mr. Deputy Speaker: With this we can take Government Amendments Nos, 60, 62, 63 and 64 and Amendment No. 113, in page 23, line 19 at end insert
or
(b) any share capital issued by a company in respect of shares in the company which confer on the holder a right to convert or exchange them into or for shares in the company of a class which is not a relevant class for the purposes of sub-section (1)(b) above, where the due date of issue of the share capital so issued precedes—

(i) the earlier of the day next after the earliest date after 5th August 1975 on which conversion or exchange of the shares could be effected by an exercise of that right; and 6th April 1976, or
(ii) in the case of share capital issued by an investment trust (within the meaning of Chapter VI of Part XII of the Taxes Act) 6th April 1977".

Mr. Barnett: These amendments provide a measure of transitional relief for shareholders until they are able to convert their shares of a special class into ordinary shares.
In cases involving a special class of shares which give a continuing right wholly or mainly to stock dividends, the shares are sooner or later convertible into ordinary shares. Where commercial or industrial companies have this type of stock dividend arrangement, the special shares are normally convertible into ordinary shares annually at the same time each year. The "locked-in" difficulty should therefore arise only in the current year and on one occasion. The amendment meets the problem by providing that a bonus issue on special shares of this kind shall not be caught by Clause 33 until the first occasion after August 1975 on which the special shares can be converted into ordinary shares or 5th April 1976 whichever date is the earlier.
The same problem arises on the "B" shares of approved investment trusts but with the added difficulty that large-scale conversion of "B" shares into ordinary shares will have a significant impact on the level of dividends paid to ordinary shareholders. This special situation is


recognised in the amendment by extending the period of transitional exemption to 5th April 1977, instead of 5th April 1976 as for other companies. I shall be happy to deal with Amendment No. 113 after the hon. Member for Horsham and Crawley has spoken to it.

Mr. Peter Hordern: I am grateful to the Chief Secretary for bringing forward the amendments and carrying out the undertaking he gave in Committee. Amendment No. 63 covers the question of investment trusts when scrip dividend shares are issued. The present position is that they are taken as worth a cash dividend, whereas scrip dividends are made in the case of an investment trust, on the asset value. What is required is to change it into a market value.
The Chief Secretary has sought to meet the point by inserting the words: "substantially greater or". It would be helpful if, in replying to this group of amendments, he could say what sort of figure he has in mind in the term "substantially greater or". Does he mean 5 per cent. of 10 per cent.? In these cases there is frequently a discount of some 20 per cent. or so, and one wants to make quite certain that the discount would be counted as "substantially greater or", as in the terms of Amendment No. 62.
I hope that the Chief Secretary will also make clear that ordinary scrip issues are outside the ambit of these provisions. I do not know whether it is necessary—I think that the Chief Secretary said it was not—to provide that ordinary bonus shares, technically known as scrip issues, are outside the scope of the Bill.
Having paid tribute to the fact that the Government have brought forward some helpful amendments on cumulative shares and convertible ordinary shares—that is to say, the shares which are "locked in" —I should like to turn to Amendment No. 113. I refer particularly to the especial position of investment trusts. As I understand it, the effect of Government Amendment No. 60, which attempts to deal with this, does so in this way.
We are talking about a transitional arrangement for investment trusts. It refers to the situation
where the due date of issue of the share capital so issued precedes the earlier of the following dates…the day next after the

earliest date after 5th August 1975…or, in the case of…an investment trust…6th April 1977".
It is the earlier of the two dates, so effectively it appears that investment trusts are not being given any effective transitional period. That is the reason for Amendment No. 113, which is termed in almost precisely the same words as the Government amendment, which allows a clear transitional period of two years from now.
The Chief Secretary will recall the tenor of our debate in Standing Committee in which we were discussing the amendment which gave a transitional period of about three years to investment trusts. In dealing with Amendment No. 377 in Standing Committee the Chief Secretary said:
I am not sure that I would necessarily go all the way with the amendment for a transitional period of three years, but I am happy to tell the hon. Gentleman"—
that was me—
that I will look at this point sympathetically with a view to bringing back a suitable amendment on Report."—[Official Report, Standing Committee H, 1st July 1975; c. 608.]
I am sure that the right hon. Gentleman meant that seriously. But the Government amendment which seeks to deal with this matter, by employing the word "earlier" does not cover the particular point of investment trusts, which is different from that of ordinary investment companies.
Ordinary commercial companies' dividends are very well covered, and of fairly recent origin, whereas in the case of investment trusts some schemes have existed for 10 years and the "B" shares in some cases represent a very significant proportion of the total capital. I am told that sometimes it is nearly 50 per cent. In addition, investment trusts are bound by statute to pay out almost all their dividends. In that case they are penalised in every way, and there is no question that if the provision goes through without transitional relief investment trusts in certain categories and in certain cases will have to reduce their dividends to existing ordinary shareholders. I am certain that the House would not wish this state of affairs to occur because it has been a well-known practice of Governments of both political parties that the small shareholder should be encouraged. The investment trust


movement is designed particularly to help the small shareholder to achieve a very wide spread of investment, far more than if he had to invest his own small sum on his own.
This is, therefore, a very desirable form of investment which needs to be encouraged. I think that Amendment No. 113 covers the point by giving a two-year transitional period.
11.30 p.m.
Replying to the original debate, the Chief Secretary said that he accepted the spirit of the amendment, although he thought that it might be rather long.
I hope that I have the attention of the Chief Secretary. I have almost finished. I hope that he will bear with me amongst all the comings and goings. This may not be an important point to the Patronage Secretary, but it is important to people outside the House.
The Chief Secretary gave a serious undertaking in Committee. He mentioned the transitional period of three years, although he was doubtful whether it was the right period. Consequently, our amendment allows a two-year period. That will make a substantial difference for investment trusts. I hope that the Chief Secretary will accept the terms of Amendment No. 113 to allow for a proper transitional period for investment trusts. We know what the consequences to the shareholders of the trusts will be if this is not allowed.
I should be grateful if the Chief Secretary would make clear the position of scrip issues.

Mr. Joel Barnett: I dealt with normal bonus issues or scrip issues in Committee, when I made it clear that the clause did not catch that type of share. I am happy to confirm that. We have taken further legal advice, which confirms that the wording of the subsection will not bring a normal bonus issue within the scope of the legislation.
The Revenue will interpret the words "substantially greater or substantially less" as meaning a difference of about 15 per cent. or more, either way. I hope that that satisfies the hon. Gentleman.

Mr. Hordern: The figure of 15 per cent. is high. I hope that a smaller figure, say 5 per cent., may be accepted. Perhaps that figure could be negotiated between the Treasury and interested

parties. I am sure that the figure is not binding. Perhaps something could be arranged later.

Mr. Barnett: The hon. Gentleman knows that there is give and take on the odd 1 per cent. or 2 per cent. I am always prepared to look at these figures and discuss them, but that is my understanding of the situation.
There is a genuine misunderstanding by the hon. Gentleman on the main point of Amendment No. 113. I undertook to look at the figures. Amendment No. 60 deals with the special situation of the locked-in problem which the hon. Gentleman raised in Committee. It does so by extending the period of transitional exemption to 5th April 1977 instead of 5th April 1976 as for other companies. But—this is the important point—it is still subject to any earlier conversion right. The hon. Gentleman's Amendment No. 113 disregards the possibility of earlier conversion and excludes bonus issues on the 'B' shares from the operation of the clause until 5th April 1977. The extension of time provided by Amendment No. 60 does not give any special help to those investment trusts where conversion may take place between 5th August 1975 and 5th April 1976. We have decided that a further concession on the lines of this amendment would be much too generous. Where there is an earlier conversion, the taxation of the bonus issues should be subject to that earlier conversion. That is not unreasonable. I hope that the hon. Gentleman agrees.

Mr. Hordern: I am not altogether happy with that reply by the Chief Secretary. As I understand it, the position will still be that investment trust shareholders who convert between the earlier date and 6th April 1977 will be caught by these provisions. That simply means that the ordinary shareholders will be put under greater strain, and in some cases investment trusts may well find themselves forced to reduce dividends. This is something I shall want to look at again.
The Chief Secretary says that the position is not as onerous as I made out. I shall certainly want to look at the position again—I am not altogether happy about it—and I am sure that the right hon. Gentleman will wish to look again at what he has said.

Amendment agreed to.

Amendments made: No. 60, in page 23,line 19, at end insert
';or
(b) any share capital issued by a company in respect of shares in the company which confer on the holder a right to convert or exchange them into or for shares in the company of a class which is not a relevant class for the purposes of sub-section (1)(b) above, where the due date of issue of the share capital so issued precedes the earlier of the following dates, namely—

(i) the day next after the earliest date after 5th August 1975 on which conversion or exchange of the shares could be effected by an exercise of that right; and
(ii) 6th April 1976 or, in the case of share capital issued by an investment trust (within the meaning of Chapter VI of Part XII of the Taxes Act), 6th April 1977'.

No. 61, in page 23, line 19, at end insert—
'(10) Where, in a case within subsection (4) above, the share capital in question is issued in respect of shares in the company issued before 6th April 1975 which confer on the holder a right to convert or exchange them into or for shares in the company of a different class, this section shall not apply to so much (if any) of any bonus share capital issued by the company after 5th April 1976 in connection with an exercise of that right as would have been issued if that right had been exercised so as to effect the conversion or exchange of the shares on the earliest possible date after 5th April 1975; and subsections (5) and (6) above shall, where applicable, have effect accordingly.
(11) Where any bonus share capital falling within subsection (1)(b) above (whether issued before or after the coming into force of this section) is after 5th April 1975 converted into or exchanged for share in the company in question of a different class, then—

(a) this section shall not apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of that bonus share capital; but
(b) sub paragraphs (a) and (b) of paragraph 6 of Schedule 8 to this Act shall apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of so much of that bonus share capital as caused an individual to be treated under subsection (4) above as having received an amount of income on the due date of issue (or would have done so if the case had been one in which an individual was beneficially entitled to that share capital).'.—[Mr. Joel Barnett.]

Schedule 8

STOCK DIVIDENDS: SUPPLEMENTARY PROVISIONS

Amendments made: No. 62, in page 92, line 42, after "is", insert "substantially greater or".

No. 63, in page 93, line 6, after 'means', insert
,subject to sub-paragraph (5) below,'.

No. 64, in page 93, line 11, at end insert—
'(5) Where, in a case falling within subparagraph (2)(b) above, the company on the occasion on which it issues the share capital in question also issues a dividend in cash ("the accompanying cash dividend") in respect of the shares in the company in respect of which that share capital is issued, "the relevant cash dividend" shall in this paragraph mean the cash dividend mentioned in sub-paragraph (2)(b) above reduced by the amount of the accompanying cash dividend.'.— [Mr. Joel Barnett.]

Clause 40

SECURITIES BOUGHT WITH BORROWED MONEY

Mr. Denzil Davies: I beg to move Amendment No. 66, in page 29, line 44, at end insert—
'and with the addition, at the end, of the following proviso—
Provided that subsection (2) above shall not by virtue of this subsection apply—

(a) in the case of a debt or liability incurred by a close company in connection with the acquisition by it of any securities, or an interest in any securities, if the proceeds accruing to the company from the redemption of the securities, or from a disposal of them or of the interest in them, are treated as a receipt of its trade; or
(b) in the case of a debt or liability incurred by a close company in connection with the acquisition by it of Treasury Bills".'.
This is an amendment to what is now Clause 40, which we discussed briefly in Committee upstairs. It relates to close trading companies where the companies borrow large sums of money, setting off the interest against other income, and thereby are able to make capital gains on securities.
I undertook in Committee to put down an amendment in response to an Opposition amendment to clarify the position in relation to close trading companies


which merely dealt in securities in the normal course of their trade and were not involved in this kind of avoidance exercise. The amendment ensures that companies which deal in securities are not covered by the clause because they are not, of course, engaged in the kind of tax avoidance that the clause in intended to cover. It also clarifies the position concerning Treasury bills. There was debate about whether they should be included in the definition of "securities". The amendment meets that point. It covers Treasury bills. It fulfils the undertaking I gave in Committee.

Amendment agreed to.

Clause 43

PAYMENT OF TAX: GENERAL

Amendment made: No. 67, in page 35, line 27, after 'of', insert a period of'.— [Mr. Joel Barnett.]

Mr. Joel Barnett: I beg to move Amendment No. 68, in page 36, line 11, at end insert—
'(4A) In section 29(5) of the Taxes Management Act 1970 (notice of assessment), after the words "shall state" there shall be inserted the words "the date on which it is issued and".'.

Mr. Deputy Speaker (Mr. George Thomas): The right hon. Gentleman might like to discuss Government Amendment No. 69 at the same time.

Mr. Barnett: Thank you, Mr. Deputy Speaker.
In Standing Committee the Opposition moved an amendment to the effect that a notice of assessment should not be valid if it did not contain a statement of the date when it was issued. I pointed out that all prints of assessment notices in current use contained a box for the insertion of the date of issue, but I agreed to consider whether the amendment could be accepted. Amendment No. 68 links that requirement to an existing requirement that the notice of assessment should state the date by which notice of appeal may be given against the assessment. That deals with the points made by hon. Members in Committee.
On Amendment No. 69, again representations were made in Committee, as well as by professional bodies, that the

requirement that an application to postpone payment of tax must be made at the same time as the notice of appeal to which it related was too restrictive. I agreed to put down an amendment for Report. This is it.

Amendment agreed to.

Clause 44

PAYMENT OF TAX PENDING APPEAL

Amendment made: No. 69, in page 37, line 8, leave out 'at the same time as the notice of appeal' and insert
'within thirty days after the date of the issue of the notice of assessment'.—[Mr. Joel Barnett.]

Mr. Peter Rees: I beg to move Amendment No. 70, in page 37, line 34, after 'appeal', insert
'provided always that if the Commissioners shall consider that the conduct of the inspector has been oppressive or vexatious they may award the taxpayer the costs of such application'.
I hope that I am moving the amendment in the atmosphere of benevolence and goodwill engendered by Amendments Nos. 68 and 69, which have been so graciously moved by the Chief Secretary and accepted by the House.
The Chief Secretary said that he recognised the merit of the representations made on Clause 44 in the Committee. This atmosphere has superseded the somewhat bizarre exchange between him and my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) over the previous amendment. Perhaps in this new spirit of goodwill the Chief Secretary will look kindly at Amendment No. 70.
The amendment is designed to introduce a further measure of liberality into Clause 44. Clause 44 is designed to enable the Revenue to recover a little earlier than it might otherwise have done tax that is not in dispute. As I said in Committee, there was at least a possibility that Section 55 which Clause 44 amends, provided the Revenue with certain remedies although the Revenue appears not to have chosen to exercise them up to now.
The Chief Secretary has introduced an elaborate and—if he will permit me to say so—cumbersome pre-trial procedure which compels the taxpayer, if he feels


that there is a greater sum of tax in dispute than the Revenue concedes, to make an application in which he has to state the grounds on which he feels he has been overcharged. The very cumbersomeness of this procedure has been recognised by Amendments Nos. 68 and 69, and I ask the Chief Secretary to build on those amendments.
In Committee I pointed out to the Chief Secretary that the pre-trial hearing before the appeal commissioners might be rather long drawn out and involve investigation of a considerable number of issues which would also have to be gone into at the substantive trial. On that occasion the Chief Secretary was prone to give us the benefit of his hunches as to how the appeal commissioners might proceed. I was a little sceptical about the Chief Secretary's hunches, his usual sunny nature was a little disturbed on that occasion and a note of asperity crept into our debate. I hope that this is now just a sad memory and that the Chief Secretary is approaching this amendment in a more buoyant spirit.
The pre-trial procedure could be onerous to the taxpayer, to the inspector and indeed to the appeal commissioners, because the appeal commissioners have to consider whether there might be a sum legitimately in dispute on the basis of representations made to them and lawful evidence adduced. In many cases these will be complex issues.
One is always flattered when the Patronage Secretary shows acute interest in the minutiae of the tax law. He may be catching your eye, Mr. Deputy Speaker, to make a contribution on this important issue. Perhaps the Chief Secretary would give us his undivided attention for a moment, although I know that he has the enviable facility of being able to listen through each ear independently.
I recognise that on the whole our Revenue system is administered with admirable imperturbability, fairness and justice by Somerset House, but there are one or two occasions on which I have seen an inspector of taxes a little overzealous in the discharge of his duties, and inclined to lean a little heavily on the taxpayer. Knowing the tender regard of the Chief Secretary for the susceptibilities of taxpayers, and knowing that most of

the harsher measures designed to grind the faces of taxpayers emanate from the Chancellor of the Exchequer rather than from the Chief Secretary, I should like him to consider that possibility.
If the right hon. Gentleman can accept that that kind of situation might arise, that we might have an inspector who has been pressing a taxpayer a little too hard, it might be fair for the appeal commissioners to have the power to award the costs to the taxpayer if he has been led into the pre-trial procedure by Clause 44. I refer to the costs which the taxpayer might have legitimately incurred in defending his own interests. It is on the basis that we should protect the taxpayer where possible, and on the basis that this modest amendment will not dampen the enthusiasm or impair the efficiency of the Commissioners of the Inland Revenue, that I move the amendment.

11.45 p.m.

Mr. Joel Barnett: I am always happy to tell the hon. and learned Member for Dover and Deal (Mr. Rees), at any hour of the day or night, that he has it wrong. I am afraid that he has it wrong on this occasion. Probably the trouble tends to stem from the somewhat higher spheres in which the hon. and learned Gentleman normally speaks when he talks of pre-trials. I must tell him that the atmosphere at a general commissioners' hearing is not like a trial of any description. One of the merits of general commissioners' hearings is the very informality which prevails. The hon. Member for Hertfordshire, South (Mr. Parkinson), who sits next to the hon. and learned Gentleman, has some experience of these matters. No doubt he will be able to explain the position to his hon. and learned Friend.
The hon. and learned Gentleman is not right to talk of commissioner hearings as being great pre-trial hearings. The amendment relates to a situation in which an inspector of taxes has been "oppressive or vexatious". That is to be more than a little unfair, and I know that the hon. and learned Gentleman is a fair man. Indeed, I see him smiling in agreement. When a matter is brought before a hearing as informal as a commissioner hearing, a taxpayer has the opportunity to appear at modest cost without having to employ learned counsel of the highest


standard, such as the hon. and learned Gentleman. Where there are costs, it would be a little unfair for them to be borne entirely by the Revenue.
I am sure that the hon. and learned Gentleman will recognise that there are likely to be many more cases where it is the taxpayer who is being vexatious. The example that we are considering, where a case is brought before the commissioners, is a situation in which from nine to 21 months has passed from the end of the year when the accounts should have been completed. The only reason for the matter being brought before the commissioners is that the taxpayer, despite that amount of time, has not submitted his accounts to enable the inspector of taxes, whether vexatiously or in any other way, to know at what level to assess him. It is to stand the matter on its head to suggest that it is only the inspector of taxes who could be in the wrong. In most cases of this description it is the other way round.
I hope that the hon. and learned Gentleman on reflection will see that what he is suggesting in the amendment would not be fair. I hope that he will ask leave to withdraw the amendment.

Mr. Ridley: My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) and the right hon. Gentleman the Chief Secretary will be flattered by the large number of right hon. and hon. Members who have come to hear this important debate. Those hon. Members who attend the Committee stage of the Finance Bill will feel that their labours upstairs have reached a fitting climax and that all due deference and respect has been paid to us by those hon. Members who have been so kind as to come back from their dinner parties, or whatever it may be, to hear our discussion. But the Chief Secretary runs the risk of falling foul of the Patronage Secretary. If the Patronage Secretary had been listening to what the Chief Secretary said—and I think he may not have been listening—he would have been vexed at the paucity of the reply.
My hon. and learned Friend deployed a sound argument. I could not understand why the Chief Secretary sought to beat my hon. and learned Friend about the head with words when such a course was so unjustified. My hon. and learned

Friend is well known on Finance Bills as being one who always advances, with utter reasonableness and great brevity, points of real substance. The Chief Secretary, having sought to defeat him with verbal brickbats, fell back on a weak argument.
In my constituency a certain Mr. Smith was brought before the commissioners for not paying his tax. An assessment was made against him which Mr. Smith refused to pay. After a long period of time and a certain amount of litigation, it turned out that he was the wrong Mr. Smith, that it was a totally different Mr. Smith who owed the tax, and that my constituent was totally guiltless. In such a case it was surely appropriate that costs should have been awarded against the Inland Revenue and not against either Mr. Smith.
I thought that my hon. and learned Friend made a strong case. I was sorry that the Chief Secretary was unable to produce a stronger and more resounding defence of the case against the amendment. I hope that my hon. and learned Friend will not feel abashed. It is clear that the House would like the debate to continue. I know that hon. Members, who have come into the Chamber in such numbers, would like to hear arguments further deployed. I invite my hon. and learned Friend not to let the matter lie. Late though the hour is, and snubbed though hon. Members are by not being allowed to have their full pay increase—

Mr. Deputy Speaker: Order. I would not wish to snub anybody, but I require the hon. Gentleman now to come to this amendment.

Mr. Ridley: I was seeking to let my hon. and learned Friend collect his thoughts.

Mr. Deputy Speaker: Order. I think it was clear what the hon. Gentleman was doing. I was listening to him, as was the rest of the House, but I should like him to speak to the amendment.

Mr. Ridley: Perhaps this is a good moment to conclude by saying that I hope that the House will accept the amendment.

Mr. Peter Rees: With the leave of the House, and With a certain diffidence, but encouraged by the fine words coming


from behind me from my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), I must rise to correct the Chief Secretary on one or two misconceptions.
The right hon. Gentleman says that he is always happy to correct me. I am always unhappy to correct him because I feel that a Minister of the Crown as a person holding an important office of State should have his facts right. Let us look again at Clause 44. It is not limited to general commissioners alone, but extends also to special commissioners of income tax. It grieves me that on occasions the Chief Secretary does not appreciate what he is about. I regret to say that on several occasions in the watches of the night I have detected a certain laxity in his approach to these matters.
Clause 44 applies to both general and special commissioners. However informal the nature of the proceedings, they can be regarded as a trial and therefore the procedure laid down in Clause 44 can be accurately described as a pre-trial trial. With his buoyant, insouciant nature he probably coasted through these occasions before the general commissioners in the North-West, perhaps with a little less gravity than we expect of him on these occasions. For people as diffident as myself these are occasions of moment when one appears before the special commissioners. Great sums of money are often at stake and close legal arguments have to be advanced.
Although the Chief Secretary would have us believe that a taxpayer can stumble in, uninstructed and unprepared, my experience in these matters is that more often than not professional assistance is needed by the taxpayer. Due to the machinations of the Government, it now appears that professional assistance will be needed on two occasions, not only on the trial of the substantive issue but also on the trial of the previous application.
I was unable to detect from the Chief Secretary's reply whether he can even envisage oppressive or vexatious conduct on the part of an inspector, or whether he can envisage such conduct but thinks we should condone it. If the first is his proposition, it is belied by the experience of my hon. Friend the Member for

Cirencester and Tewkesbury and his constituent, Mr. Smith. I hope that Mr. Smith's case has been presented to the Ombudsman for further examination, because there are these unfortunate administrative lapses, and we should be very quick to pick them up.
If, on the other hand, the Chief Secretary is saying that such lapses, when they occur, should be condoned, that opens up a vast and profound gulf between the two sides of the House, because I do not believe that we should overlook these administrative lapses. It is because they occur, albeit rather rarely, that I feel that there should be some very small measure of protection to the taxpayer. He should he awarded his costs if the general or special commissioners, in their experience and discretion, feel that he has been harshly treated.
I ask no more and no less, and if the Chief Secretary says that there is a certain asymmetry in my approach, I shall have to refer to that argument when we come to the next amendment. Any imbalance is corrected by the fact that the Inland Revenue will, of course, be paid interest from a very early date.
I started in moving the amendment by saying that there was a feeling of good will. I am bound to tell the Chief Secretary that the temperature has been lowered appreciably as a result of his rather ill-judged comments. However, I would be the last person, I hope, to disturb the equanimity of the House at this late hour. Bearing in mind that we shall always be able to return to these matters when we have turned out such unfortunate instances as those of which my hon. Friend has reminded the House, perhaps we shall be able to come back to this on another occasion in another year. I await the possibility of yet a fourth Finance Bill emerging from this administration before long, perhaps in October or November and when that happens I shall present to the House some hard evidence of the kinds of occasion which I fear may arise. Until that moment, to preserve the feeling of good will, albeit slightly chilled, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 72, in page 39, line 14, at beginning insert
Section 45(2) above shall not apply to an application under subsection (3) or (4) above; and'.

No. 73, in line 28, at end insert—
(2A) Section 56(9) (statement of case for opinion of the High Court) and section 59(6) (election for county court in Northern Ireland) of the said Act of 1970 shall each be amended by substituting for paragraph (b) of the proviso—
(b) if too little tax has been charged, the amount under-charged shall be due and payable at the expiration of a period of thirty days beginning with the date on which the inspector issues to the other party a notice of the total amount payable in accordance with the order or judgment of that court."'—[Mr. Joel Barnett.]

Clause 45

INTEREST ON UNPAID TAX

Amendments made: No. 74, in page 40, line 14, leave out
which becomes due and payable by virtue of
and insert
the date for the payment of which is given by

No. 75, in line 18 leave out from first "on" to "that" in line 19 and insert "an earlier date".—[Mr. Joel Barnett]

12 midnight

Mr. Peter Rees: I beg to move Amendment No. 76, in page 40, line 31, leave out "1st July" and insert "5th April".

Mr. Deputy Speaker: With this amendment, it may be convenient to discuss the following:

No. 78, in page 41, line 2, leave out "six" and insert "twelve".

No. 80, in line 10, leave out "1st January" and insert "5th April".

No. 81, in line 15, leave out "1st January" and insert "5th April".

No. 82, in line 18, leave out "six" and insert "twelve".

Mr. Rees: This group of amendments is designed to liberalise the interest provisions which accelerate and steepen the payments of interest by a taxpayer who is found on appeal to owe money to the Revenue.
On both sides of the House, we recognise the objectives which the Government have set themselves. We may even say, though with less enthusiasm than the Chief Secretary, that we welcome those objectives. Where we take issue with the right hon. Gentleman is in the methods that he has chosen to adopt.
We appreciate that the Chief Secretary is anxious to accelerate the payment of tax. If the measures that the Bill introduces succeed in their objectives, I have no doubt that the amount of tax gathered this year will be substantially greater and will go far to offset the disappointment which the right hon. Gentleman must feel over the outcome of Amendment No. 30. It is not for me to rub salt into fresh wounds, but there will be a modest consolation for the right hon. Gentleman in these provisions.
However, we must strike a balance between the interests of the Commissioners of Inland Revenue and those of the taxpayers, and, as I read Clauses 44 and 45, I find no balance in these provisions. We have the most onerous provisions imposing interest on a taxpayer at a net rate of 9 per cent. which, with current rates of taxation, must be penal. I compare that with the repayment supplement that the Revenue may in certain situations be obliged to make, and I contrast the date from which the repayment supplement is to run with the interest payments.
The hon. Member for Durham (Mr. Hughes), who manfully, if silently, supported the Chief Secretary, was moved in Committee to make a solitary intervention, and he reminded the Committee that this embodied some recommendation of the Ombudsman, and tears practically came to his eyes as he testified to the generosity and the far-seeing nature of the Chief Secretary's measures. However, he was unable to explain why the repayment supplement is to run from a different date from the date from which the interest payable by a taxpayer is to be paid. This is an unattractive piece of asymmetry.
The Chief Secretary recognised that there might be a situation where a taxpayer won his case on appeal before Commissioners but subsequently, because it was a very refined point of law, he had his victory upset in a higher court. The right hon. Gentleman said:
The situation can arise that a taxpayer wins his case before the commissioners and there is no tax liability, the Revenue takes it to the courts, and eventually wins the case in the higher courts. In those circumstances, it seems unfair that the taxpayer should have to pay interest going back to the due date. I take that point, and hope to be able to have something drafted by Report to meet it."


—[Official Report, Standing Committee A, 2nd July 1975, c. 804.]
Alas, I have searched the Amendment Paper in vain—

Mr. Joel Barnett: The hon. and learned Gentleman has not searched anxiously enough. If he looks further on, he will find it.

Mr. Rees: Perhaps the right hon. Gentleman will direct my gaze to the amendent in question—

Mr. Barnett: When we come to it.

Mr. Rees: It would be a little more courteous if the right hon. Gentleman directed my gaze to it now. It does not immediately come to mind.
Since the right hon. Gentleman will not rise to the challenge, I wonder what he has in store for us. But, whether or not he has honoured his promise in that regard, he has not faced the argument squarely put to him in Committee that the interest provisions do not match the repayment supplement provisions. Unless they do, I believe that there is an element of injustice to the taxpayer.
Our tax system depends on the consent and co-operation of the whole body of taxpayers. Indeed, that has been recognised on many occasions by the Inland Revenue. If the good will of the taxpayer evaporates as a result of the crude and insensitive measures of this administration, we shall all be the sufferers—Somerset House not the least.
I do not expect the Chancellor of the Exchequer, with his woeful insensitivity in these matters, to appreciate this kind of argument. But the Chief Secretary has on occasions shown a certain understanding of and feeling for problems which can be thrown up by a rather heavy tax system. I hope, therefore, that he will live up to the spirit of good will that he has engendered from time to time in the past and will look a little more kindly on these amendments than he was disposed to do on equivalent amendments in Committee.

Mr. Joel Barnett: I suggest that the hon. and learned Member for Dover and Deal (Mr. Rees) did not notice the amendment to which he referred because we have passed it. It was Amendment No. 73, relating to Clause 44, which he

and others of his right hon. and hon. Friends were kind enough to approve a little while ago.
The amendments with which we are now concerned seek to extend the waiting period before interest will start to run to 12 months. The hon. and learned Gentleman made a comparison with the repayment supplement which is made on tax that is repaid late to taxpayers. I thought that he was a little churlish, as were the Opposition generally, because no Government have up to now been able to find a way of paying interest on arrears of repayment of tax. This Government have managed to find a way to accede to the request of the Ombudsman and the Select Committee that interest should be paid on tax that is repaid late.
As I explained in Committee, the tax that is repaid late concerns 5 million PAYE cases out of a total of 5½ million repayments of tax made each year. In those cases the repayment supplement will be payable from 12 months after the year in which the tax has been overpaid. The reason for that is simple. Before a repayment can be made, the taxpayer must submit a return in the following year. Frequently the whole of the following year elapses before the return is submitted and agreed.
Apart from that, as I explained on the previous amendment and frequently upstairs when discussing the comparison between PAYE tax payments and Schedule D, the Schedule D taxpayer—unlike the man on pay-as-you-earn who has to pay tax every week—even if he pays his tax on time, pays it from nine months as a minimum to 21 months after the year end in which the profits have been made. Therefore, when the hon. and learned Gentleman talks of a comparison with the PAYE taxpayer, he really is putting the matter unfairly.
We have allowed a six-month waiting period even beyond the nine to 21 months. The House will recall that the only reason why the tax has not been settled and the correct figure agreed between the inspector and the taxpayer is not the fault of the inspector. In the vast majority of cases it is because the taxpayer has not submitted his accounts, and he has plenty of time to do so.
The Government have at long last provided for the repayment of tax with interest, mainly under PAYE. I do not


think it is a good argument to say that we should make the same comparison with Schedule D taxpayers and allow yet a further 12 months' waiting period. I am sure that on reflection the hon. and learned Gentleman will recognise that would be going much too far.
I know that my hon. Friends will accept the point readily and I hope that they will resist the amendment if, as I anticipate, the hon. and learned Member presses it to a Division.

Mr. Ridley: It seems to be necessary, every time my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) moves an amendment with his customary skill and diligence, for me to defend him from the Chief Secretary.
Once again, the Chief Secretary has used abusive language and has described my hon. and learned Friend as not at all comprehending the substance of the matters before the House. Once again I try to heal the breach which is rapidly opening between the two. I ascribe the fault for the breach entirely to the Chief Secretary because an amendment more reasonably moved would be hard to find.
It can often be the case that PAYE taxpayers will be those making the appeal and they will have paid tax in the week they earn the money so that if there is a long and drawn-out appeal which goes eventually to the top, there will be several years when they will have been out of their money. If they win the case, they will not get interest until a considerable period after they paid the tax. Many of those who could be penalised by this clause could be PAYE taxpayers.
The Chief Secretary's second point was that a great act of Socialist benevolence had for the first time made possible payments of taxpayer interest. Grateful as we are for this change in our law—and it is long overdue, in my opinion—it does not constitute an argument for saying that, when an appeal goes against him, the taxpayer should be made to pay interest on tax, from a much earlier date than if the appeal goes in his favour.
I understand that there will be a long delay before repayment of interest has to be made by the Treasury on money to be repaid to the taxpayer. We contend that in order to equalise the two disputants the date from which interest should be payable should be the same for the

taxpayer as for the Revenue. That is the point of the amendment.
The inequity, of which the Ombudsman and many hon. Gentlemen have complained in the past, that one paid interest on unpaid tax to the Revenue but the Revenue did not pay interest to the taxpayer on tax to be refunded is met in part by this clause, but my hon. and learned Friend's amendment would allow it to be met in full. It is only right that we should continue to urge on the Government that in the payment of interest on tax to be repaid the taxpayer should be treated similarly to the Revenue. My hon. and learned Friend would be right to press the Amendment.

Mr. Peter Rees: The Chief Secretary takes great credit for being a member of the first administration which has introduced a system of payment of interest on taxes refunded by the Revenue—that is, a repayment supplement. That may be so, but he has the discreditable record of being a member of the first administration which has introduced measures for paying a penal rate of tax which will discourage many legitimate appeals. The one will be weighed by the country against the other. All I say to the Chief Secretary is that if we are to have repayment supplement, let it start from the same date as that from which the interest payable by taxpayers starts. If that proves administratively impossible, let the interest payable on tax due start from the same date as that on which the repayment supplement would start. In that way, fairness, equity and symmetry would be achieved.
This argument escapes the Chief Secretary. Therefore, I can only hope that it will be recognised in the country and that, in advance of that, my right hon. and hon. Friends will join me in pressing the amendment to a Division.

Amendment negatived.

12.15 a.m.

Amendments made:

No. 77, in page 40, line 38, leave out 'Taxes' and insert 'principal'.

No. 79, in page 41, line 8, leave out 'Taxes' and insert 'principal'.

No. 83, in page 42, line 38, at end insert—
'(4A) Section 109 of the said Act of 1970 (which, in relation to tax charged in connection with loans and other payments made


and shortfalls occurring before 6th April 1973, has effect as originally enacted and, in relation to tax charged in connection with loans made on or after that date, has effect as substituted by paragraph 13 of Schedule 24 to the Finance Act 1972) shall be amended as follows—

(a) in subsection (4) as originally enacted, for the words "subsection (2) and paragraph (a) of subsection (3)" there shall be substituted the words "subsection (4) and the words 'or the date mentioned in subsection (4) below, whichever is the later' in subsection (3)(a)",
(b) in subsection (2) as so substituted, for the words "subsections (2) and (3)(a) of the said section 86 were omitted "there shall be substituted the words" the date given by the Table in subsection (4) of the said section 86 were the last day of the three months following the end of the financial year in which the loan or advance was made", and
(c) in subsection (3) as so substituted, for the words "year of assessment" there shall be substituted the words "financial year".'—[Mr. Joel Barnett.]

Clause 56

DISPOSAL OF SHARES AND SECURITIES WITHIN PRESCRIBED PERIOD OF ACQUISITION

Amendments made: No. 86, in page 53, line 41, leave out 'references in that subsection' and insert
'for the purposes of paragraph (b) any shares acquired by that company from another company which was a member of the group throughout the prescribed period before and after the disposal shall be disregarded.
(3) References in subsection (1) above'.

No. 87 in page 53, line 43, at end insert
';and references in that subsection to the holding or acquisition of shares do not include references to the holding or acquisition of shares as trading stock.

No. 88, in page 55, line 15, at end insert
'trading stock", in relation to a company carrying on life assurance business as defined in section 323 of the Taxes Act, does not include investments held in connection with that business except in so far as they are referable to general annuity business or pension business as defined in that section.'.

No. 89, in page 55, leave out lines 16 to 20 and insert
(10) Shares shall not be treated for the purpose of this section as being of the same kind unless they are treated as being of the same class by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.'.—[Mr. Joel Barnett.]

Clause 57

LOSSES ON DISPOSALS OF GILT-EDGED SECURITIES REPLACED WITHIN PRESCRIBED PERIOD

Amendments made: No. 90, in page 55, line 29, after 'period', insert 'after the acquisition'.

No. 91, in page 55, line 33, after 'period', insert 'after the disposal'.

No. 92, in page 56, line 10, at end insert
'before and after the disposal'.

No. 93, in page 56, line 18, at end insert
'"trading stock", in relation to a company carrying on life assurance business as defined in section 323 of the Taxes Act, does not include investments held in connection with that business except in so far as they are referable to general annuity business or pension business as defined in that section.'.—[Mr. Joel Barnett.]

Clause 65

INTRODUCTORY

Amendments made: No. 94, in page 58, line 38, after 'effect', insert
'except in relation to sums payable under section 29 thereof before that date'.

No. 95, in page 58, line 39, at end insert
'(subject to that exception)'.—[Mr. Joel Barnett.]

Clause 66

DEDUCTIONS ON ACCOUNT OF TAX ETC. FROM PAYMENTS TO CERTAIN SUB-CONTRACTORS IN CONSTRUCTION INDUSTRY

Amendment made: No. 96, in page 59, line 32, after 'which', insert 'on or'.—[Mr. Joel Barnett.]

Schedule 11

SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY: CONDITIONS OF ISSUE OF CERTIFICATES

Amendment made: No. 97, in page 105, line 37, leave out paragraph (d) and insert
'(d) the business is carried on from proper premises and with proper equipment, stock and other facilities.'.—[Mr. Joel Barnett.]

Mr. Robert Sheldon: I beg to move Amendment No. 98, in page 106, line 23, at end insert
'5A.—(1) Subject to sub-paragraph (2) below, there must be in force a policy or policies of


insurance covering the applicant's relevant public liability in respect of the business referred to in paragraph 1 above and effected by him with an authorised insurer or insurers in a sum not less or not less in aggregate than £250,000.
(2) Sub-paragraph (1) above does not apply to an applicant whose business consists of the furnishing or arranging for the furnishing of labour in carrying out construction operations or whose business includes any of those activities but does not also include the carrying out of construction operations.'.
I understand that with this amendment it is convenient to take Government Amendments Nos. 99–102.
The amendments add a further condition to those, set out in the schedule, which sub-contractors have to meet before they can qualify for a sub-contractor's tax certificate to allow them to receive payments in full from contractors, instead of under deduction of tax at source. The additional condition is that a subcontractor shall have taken out adequate public liability insurance.
This requirement was not originally included in the battery of tests provided for in the schedule, because, as the House will know, my right hon. Friend the Minister for Planning and Local Government had been intending to introduce a measure on the lines of the 1970 Construction Industry Contracts Bill. That Bill contained a requirement that, in order to be registered, a sub-contractor would have to be covered against this liability. Accordingly, to avoid duplication, we did not include the condition in the tax legislation.
My right hon. Friend has, however, now announced that further detailed study of his proposals has revealed that his scheme would involve a substantial overlap with the revised Inland Revenue deduction scheme which we are now discussing. He said that he did not, therefore, propose to bring forward further separate legislation for the time being, and that, instead, the Government intend to concentrate their attack on the abuses of the lump through the Finance Bill measures. We are, therefore, proposing to take into this Bill the public liability insurance test so as to make this legislation comprehensive.
I hope that hon. Members agree that it is sensible to incorporate this additional requirement. To have adequate public liability insurance to provide cover

against injury to third parties or other damage caused by construction operations is clearly a provision that one could reasonably expect a bona fide subcontractor to undertake.
The intention of the Schedule is to provide criteria for distinguishing the bona fide business from the bogus business—that is, where the proprietor has no intention of carrying out his statutory obligations, including paying his tax. This new condition will be a further useful indicator as to the potential reliability of the proprietor.

Mr. David Howell: The Financial Secretary has spoken of new conditions which he is adding to the schedule. He will recall that in Committee we pointed out the doubtfulness of the validity of some of the conditions already in the schedule, in particular the proposition under Schedule 11 Part I (1)(d) that the Revenue should be entitled to judge whether a business was being carried out in a reasonably efficient manner. We questioned whether the Revenue was, perhaps, the best body to judge efficiency in any organisation, even in the Revenue itself, let alone in any other business.
The Financial Secretary was too concerned to look again at this wording to see whether a better definition of "reasonably efficient" could be established. We expect to hear rather more from him on that and rather less on this lengthy additional condition he has inserted for broader reasons.

Mr. Sheldon: The hon. Gentleman referred to Amendment No. 97. That was carried by the vote of this House a few moments ago. Perhaps I might remind hon. Members that we introduced the change that I suggested on Report, and that the conditions for efficient operation have been withdrawn and replaced by the condition that the business is carried on from proper premises and with proper equipment, stock and other facilities. I think that met the intentions of the Standing Committee. I had hoped that that would be approved, as in fact it was by the vote of the House today.

Amendment agreed to.

Amendments made: No. 99, in page 107, line 32, at end insert—
'3A.—(1) Subject to sub-paragraph (2) below, there must be in force a policy or


policies of insurance covering the relevant public liability of every partner in the firm in respect of the business referred to in paragraph I above and effected on behalf of the firm with an authorised insurer or insurers in a sum not less or not less in the aggregate than £250,000.
(2) Sub-paragraph (1) above does not apply to a firm whose business consists of the furnishing or arranging for the furnishing of labour in carrying out construction operations or whose business includes any of those activities but does not also include the carrying out of construction operations.'.

No. 100, in page 108, line 21, at end insert—
'4A.—(1) Subject to sub-paragraphs (2) and (3) below, there must be in force a policy or policies of insurance covering the company's relevant public liability in respect of the business referred to in paragraph I above and effected by the company with an authorised insurer or insurers in a sum not less or not less in the aggregate than £250,000.
(2) Sub-paragraph (1) above does not apply to a company whose business consists of the furnishing or arranging for the furnishing of labour in carrying out construction operations or whose business includes any of those activities but does not also include the carrying out of construction operations.
(3) Sub-paragraph (1) above does not apply where—

(a) the companies carries on the business referred to in paragraph 1 above in partnership with another person;
(b) the company's application for the issue of a certificate under section 67 of this Act is for its issue to the company as a partner in that firm; and
(c) there is in force a policy or policies of insurance covering the relevant public liability of every partner in that firm in respect of the firm's business in so far as it is required by paragraph 3A of Part III of this Schedule.'.—[Mr. Robert Sheldon.]

Clause 68

INTERPRETATION OF CHAPTER II

Amendments made:

No. 101, in page 65, line 7, at end insert—
'(1A) "Authorised insurer" means a person or body of persons lawfully carrying on in Great Britain insurance business of any class relevant for the purposes of Part I of the Insurance Companies Act 1974 or in Northern Ireland insurance business of any class relevant for the purposes of the Insurance Companies Act (Northern Ireland) 1968'.

No. 102, in page 65, line 29, at end insert—
'(5A) References to relevant public liability in respect of the business of an individual, a

firm or a company carrying out any description of construction operations are references to any liability—

(a) which may be incurred by the individual, firm or company in respect of bodily injury or disease sustained in the United Kingdom by any person (other than that individual or the partners in that firm, as the case may be); and
(b) which arises from the carrying out of that description of construction operations in the course of that business;
but not to a liability in respect of which the individual, firm or company is required to maintain insurance under the Employers' Liability (Compulsory Insurance) Act 1969 or Part VI of the Road Traffic Act 1972 or (in Northern Ireland) under Part V of the Road Traffic Act (Northern Ireland) 1970 or Part III of the Employers' Liability (Defective Equipment and Compulsory Insurance) (Northern Ireland) Order 1972.'.—[Mr. Robert Sheldon.]

New Schedule

AMENDMENTS OF ENACTMENTS RELATING TO FRIENDLY SOCIETIES

PART I

AMENDMENTS OF FRIENDLY SOCIETIES ACT 1974

1. The Friendly Societies Act 1974 shall be amended in accordance with the following provisions of this Part of this Schedule.

2. For subsection (3) of section 7 (societies which may be registered) substitute—
(3) A friendly society or branch thereof may not be registered under this Act—

(a) if it contracts with any person for the assurance under tax exempt life or endowment business of more than £104 a year by way of annuity or more than £500 by way of gross sum; or
(b) if it contracts with any person for the assurance of an annuity or of a gross sum in excess of the limits in section 64 below.
(3A) In the case of a registered friendly society or branch whose rules make no provision for it to carry on life or endowment business consisting of the assurance of gross sums exceeding £1,000 or of the granting of annuities of annual amounts exceeding £208, subsection (3)(a) above shall have effect with the substitution of references to £208 and £1,000 respectively for the references to £104 and £500'.

3. In section 7, at the end add—
(5) In this section 'life or endowment business' and 'tax exempt life or endowment business' have the meanings assigned to them by subsections (2) and (3) respectively of section 337 of the Income and Corporation Taxes Act 1970; and subsection

(2) of section 64 below shall apply in relation to the limits in subsection (3) above (including, where applicable, those limits as modified by subsection (3A) above) as it applies in relation to the limits in section 64 below.

4. In section 64(1) (maximum benefits), for the references to £500 and £104 in paragraphs (a) and (b) substitute references to £1,000 and £208 respectively.

PART II

AMENDMENTS OF FRIENDLY SOCIETIES ACT (NORTHERN IRELAND) 1970

5. The Friendly Societies Act (Northern Ireland) 1970 shall be amended in accordance with the following provisons of this Part of this Schedule.

6. For subsection (3) of section 1 (societies which may be registered), make the same substitution as is provided for in paragraph 2 above, but with the omission of the words "below" and "above".

7. In section 1, at the end make the same addition as is provided for in paragraph 3 above, but with the substitution of the words "section 55" for the words "section 64 below" in both places where they occur, and the omission of the word "above" in both places where it occurs.

8. In section 55(1) (maximum benefits), for the references to £500 and £104 in paragraphs (a) and (b) substitute references to £1,000 and £208 respectively.

9. In section 55(2), after "gross sum or annuity" insert ",any approved annuities as defined in section 226(13) of the Income and Corporation Taxes Act 1970".

10. For section 55(91(a) substitute—
(a) 'life or endowment business' has the meaning assigned to it by subsection (2) of section 337 of the Income and Corporation Taxes Act 1970".'—[Mr. Robert Sheldon.]

Brought up, and read the First and Second time and added to the Bill.

Schedule 13

ENACTMENTS REPEALED

Amendments made:

No. 104, in page 112, column 3, leave out lines 28 to 33.

No. 105, in page 113, line 5, at end insert—


'1966 c. 18
The Finance Act1966.
Section 29(4) and (9), so far as unrepealed.




In Schedule 8, Part II so far as unrepealed'.

No. 106, in page 113, line 18, column 3, at end insert—
'In Schedule 15, paragraph 3(2) and (3)'.

No. 107, in page 113, line 43, at end insert—
'except in relation to sums payable before that day under the said section 29'.—[Mr. Robert Sheldon.]

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed.

The Parliamentary Secretary to the Treasury (Mr. Robert Mellish): On a point of order, Mr. Deputy Speaker. The House will recall that early tonight an amendment was carried by the Opposition which will result in the Exchequer being unable to claim a sum of approximately £90 million as part of its revenue. That vote was carried by a majority of two.
Last year when a minority Labour Government were in power there was an instance in which my right hon. Friend the Member for Manchester, Central (Mr. Lever), was involved and he was nodded through in all good faith by members of the Whips' department. Following that, there was a great fracas in this House. We had stormy scenes. The House was adjourned and you, Mr. Deputy Speaker, will remember only too well that the Press made great play of what was regarded at that moment as very dishonourable behaviour. There were abject apologies from my right hon. Friend at the time, because of what was then understood to be a misunderstanding.
The first thing I want to get on record is that tonight, in that momentous vote, the right hon. Member for Bridlington (Mr. Wood), who is a highly respected Member of this House and who is very badly disabled and injured—it is the common practice to nod him through, and we always accept that—was nodded through in a majority of only two. It is now known that the right hon. Member for Bridlington was in fact paired and, therefore, ought not to have been nodded through. I ask at once for an explanation of that tonight from the Opposition Front Bench. That has to be explained.
Concerning the other one vote, discussions are going on through what are known as the usual channels—which remain cordial, I am glad to say; at least, I think that they do, for the moment—with regard to other votes that were or were not cast. I want to make it perfectly clear to the whole House—and the only way in which I can do it is on a point of order—that I reserve my position and that of the Government and my party


as to what action we shall take following the most exhaustive inquiries into the pairing. I also want to hear from the Opposition Front Bench with regard to the nodding that took place. [Interruption.]
If it is disreputable for us to have done it, it is disreputable for the Tories to have done it. That must be clearly understood. Let there be no humbug from hon. Gentlemen who know nothing about these matters anyway.
I reserve the position of my party and the Government and make it perfectly clear that I shall return on Monday to see how this matter—if we so decide—should be resolved. I want to hear from the Opposition Front Bench the explanation for the nodding through of a Member who was paired.

Mr. Humphrey Atkins: Further to that point of order, Mr. Deputy Speaker. Perhaps I may say at once to the right hon. Gentleman—publicly, as I have already said to him privately—that the nodding through of my right hon. Friend the Member for Bridlington (Mr. Wood) was an error for which I deeply apologise. It was nothing to do with my right hon. Friend himself. It was entirely the fault of myself and my department. I express publicly to the right hon. Gentleman the Government Chief Whip and to the House apology for my error. I am very sorry for it.
As the right hon. Gentleman has been generous enough to acknowledge—and rightly acknowledge—this of itself makes no difference to the outcome of the vote. He has said that discussions are going on through the usual channels and inquiries as to what happened in other cases. I am most ready to join in these discussions and inquiries and I am as anxious as he is to get to the bottom of what has happened and to ascertain whether there were any misunderstandings in the private arrangements—which pairing arrangements are—between Members. I do not think that there were, although the right hon. Gentleman may think so. Of course, we shall do our utmost to get to the bottom of it.
I can understand that the right hon. Gentleman wishes to reserve the Government's position. I am not quite sure what

that means. The right hon. Gentleman used the phrase. No doubt he has some ideas in mind. I would not know what they are. But naturally, I accept that lie must reserve the Government's position.
I am deeply sorry about the error in relation to my right hon. Friend the Member for Bridlington. I am most ready to engage in any other discussions about what happened in regard to the one vote by which the Opposition defeated the Government earlier this evening.

Mr. Dennis Skinner: Further to that point of order, Mr. Deputy Speaker. I listened closely to the exchanges on this point of order. In view of what took place yesterday with regard to another matter, and the question of pay for Members of Parliament who spend many hours here during the week, it is as well to point out that this matter highlights the fact that consequent upon this rather archaic pairing system we have had a vote in which about 200 Members have taken part in a Division on part of a Finance Bill which was described by my hon. Friend the Chief Whip as being momentous.
When compared with, for instance, miners being absent on Mondays at the rate of about 17 per cent., and this being represented in the Press as being blatant absenteeism, when all these things are taken into account, do not they make this place look more than a little ridiculous? Would it not be better if we had a proper system similar to that which most workers have, whereby their attendance is recorded more fully than is the attendance of hon. Members here? We should not then have the present situation which was implied by my right hon. Friend.
This is not just a question of an hon. Member being nodded through at 10·15 p.m. on a Thursday when he is not even here. According to discussions in which I have taken part, there have been pairings first with one hon. Member and then with another until even the Whips were not sure how many Opposition Members were present or should have been present when they defeated the Government. As a result, there is uncertainty about whether the vote is to be challenged at a later date. On the last occasion, my right hon. Friend the Member for Manchester, Central (Mr. Lever) was brought before


the House and had to make a grovelling statement on why he was unable to be present.
This all shows this place in a very bad light. It is time we learned the lesson and did not complain about the excessive pay of manual and other workers, who produce the real wealth of this country, and did not bring in measures in order to control their wages.

Mr. Deputy Speaker (Mr. George Thomas): Order. The question of pairing has long been accepted as one for honourable arrangement. It is nothing to do with the Chair. On the other matters that have been raised, no doubt they will be pursued in other channels. There is nothing we can do tonight. The House has just given the Bill a Third Reading.

Mr. Ridley: Further to that point of order. I would hate it to go out from this House that we all agree with the words of the hon. Member for Bolsover (Mr. Skinner) who thinks our decisions should be registered in the same way as the decisions of a trade union—

Mr. Deputy Speaker: Order. I can see another very experienced right hon. Gentleman sitting on the edge of his seat, which rather alarms me. I hope that we are not going to have cross-arguments on matters which are not in fact points of order that I can resolve. The only matters that can be raised with me are those for which I carry some responsibility while I am in the Chair.

Mr. Ridley: It would be quite wrong to bring in the issue of pairing. The only question for you, Mr. Deputy Speaker, is whether hon. Members whose names appear on the Division List in the morning were present to vote. The Opposition Chief Whip has made the honourable admission that, in one case, this was not so. The question of pairing is irrelevant. The only matter that should be raised is whether any other hon. Members were nodded through when they were not present. I know that there were many hon. Members present who did not go into the Lobbies. That is probably the reason the Government were defeated.
This is a very important matter and it looks as if the Government are claiming that the defeat was due not to the failure of their hon. Members to respond to the Whip but to some irregularity.

Mr. Deputy Speaker: I have the hon. Gentleman's point. As Mr. Speaker ruled on the last occasion, a correction can be made only if the Tellers come to the Chair and say that they believe that the figures were wrong. Only in those circumstances can any change be made.

Mr. Graham Page: Further to the point of order. Mr. Deputy Chairman. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has almost made the point of order I wanted to make. However, may I seek your guidance on a further matter. The Patronage Secretary said that he was reserving his position. Are we to understand that he intends to bring before the House the question of some error in pairing which, as you have said, has nothing to do with the Chair? Are we to expect some interruption of business tomorrow for something of the sort? As you have said, it cannot change the vote.

Mr. Deputy Speaker: I have only two corrections. First, I am not the Deputy Chairman. Secondly, what the right hon. Gentleman says is in his own responsibility and what happens on Monday is yet to be decided.

INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) BILL [Lords]

Order for Second Reading read.

Motion made, and Question put forthwith pursuant to Standing Order No. 66 (Second Reading Committees), That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

STATUTORY INSTRUMENTS

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments),

CUSTOMS AND EXCISE

That the Customs Duties and Drawback, (Revenue Duties) (African, Caribbean and Pacific States) Order 1975 (S.I., 1975, No. 1062), a copy of which was laid before this House on 30th June, be approved.—[Mr. Dunn.]

HOUSING

That the Assistance for House Purchase and Improvement (Increase of Subsidy) Order 1975, a draft of which was laid before this House on 3rd July, be approved.—[Mr. Dunn.]

Question agreed to.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dunn.]

PILKINGTON GROUP (MERSEYSIDE)

12.37 a.m.

Mr. Leslie Spriggs: I rise to make the case for the Ravenhead works in St. Helens and briefly to refer to the immediate background to the crisis which lies in the Pilkington Group's intention to close the Ravenhead plant in the town. Such a move would create a job loss of 750, in addition to previous redundancies at that plant and elsewhere in the company in an area where there are already well over 61,000 unemployed.
On 13th May 1975 a meeting was held at the DTI with the then Secretary of State for Industry to discuss the plight of the Ravenhead works. Representatives of the company, the General and Municipal Workers' Union, the Association of Scientific, Technical and Managerial Staffs and the Amalgamated Union of Engineering Workers were present. The company indicated three conditions for ensuring the continuity of glass making at Ravenhead.
They were, first, a load of at least 1 million sets of glass parts per year, of which 800,000 must come from the home

market; secondly, realistic prices, giving an acceptable level of return on the capital employed; thirdly, an organisational structure involving Ravenhead and Skelmersdale within which Pilkington would have the ability to influence events and to plan forward in terms of volume, price and manufacturing programme, including sizes, designs and so on, with reasonable certainty.
It was clear, though, in view of the remarks the company made about losses of around £400,000 per month and the effect on group profitability, that only some form of temporary subsidy would ease the immediate situation. The Secretary of State promised to consider this carefully with the aid of a paper to be written by the civil servants at DTI.
A further meeting between GMWU and the Government was held on 22nd May 1975, to discuss the total situation at Pilkington's. Certain major requests were put to the Secretary of State. They were, first, Government help to obtain information from the company; secondly, Government money to aid production; thirdly, immediate aid on Ravenhead, and a rapid decision on the longer term future of television tubes; fourthly, pressure on BLMC and others to use Pilkington's glass; fifthly, urgent examination of the need for television tubes and flat glass, import controls, and immediate action in the Department of Trade on the dumping of television tubes.
I have referred to unemployment in the Merseyside area—which has become a national disgrace and a real social scourge, affecting the image of the United Kingdom—where well over 61,000 people have been unemployed for some time. A further figure of 750 unemployed men in St. Helens alone will swell this huge figure beyond acceptability.
Unless each relevant Government Department shows real determination to retain a fair share of the home market for British industry, and an equally determined effort to stop other countries from exporting their unemployment to Britain, many more jobs will be lost to our people.
Dumping is unfair, whichever firm or country happens to be guilty. It will be necessary to investigate the allegations which have been made about the prices charged and price reductions made by


Japanese television tubes and set exporters to the United Kingdom, and I shall return to this problem again. I invite the Minister and his Department to read Appendix 1 to the notes which have been sent to him.
In passing, it will not do any harm to mention BLMC, which, whilst being financed by the Treasury, has imported foreign glass for its buses, cars and lorries since 1972_ We from St. Helens are becoming alarmed at the delay in making the results of the inquiry into this serious matter known to the public.
Horticultural glass is another product imported from foreign sources, and again we cannot obtain the details which would be required to bring a complaint about dumping. I assure the Minister that many of us will be grateful for this kind of information, because since last October 225 jobs were lost at Cowley Hill glass works, 500 jobs at the sheet glass works and 550 jobs at Ravenhead glass works.
The General and Municipal Workers' Union ask for Government help to obtain information from the company. No doubt, the other interested trade unions will be obliged if the Minister will use his good offices to ensure that the lines of communication between his Department, trade unions and management are kept open, in the long-term interests of good industrial relations.
The Pilkington Company has decided upon the closure of Ravenhead because it is said to be losing some £400,000 per month.
In the long term, I believe that it would be economic suicide for the Government to allow not only the loss of 750 jobs but the loss of a British television tube industry—Ravenhead—which is the most modern and efficient television tube works in the world, when there is a strong possibility of a new television industry opening up in the Northern Ireland area during 1976, thus providing new markets.
A plant that has had more than £6½ million invested during the last 18 months to bring Ravenhead up to the highest possible standard of efficiency, deserves Government support. I trust that my constituents will receive more hope of their jobs being saved than has been forthcoming so far. I look forward to the Minister's bringing pressure to bear on Government Departments to save the jobs

we have, in the national and regional interests of the country.

12.45 a.m.

The Under-Secretary of State for Employment (Mr. John Fraser): I should first like to congratulate my hon. Friend the Member for St. Helens (Mr. Spriggs) on raising this matter tonight. It is not the first time, since I have been a Minister, that he has proved to be a doughty fighter for the rights and interests of his constituents, and I am sure they very much appreciate the points he has raised tonight.
Secondly, I can well understand my hon. Friend's regret, which he expressed in his speech, that a modern plant should close when there has been recent investment in modern equipment, where there are good industrial relations, where despite the downturn in trade, there remains a large home market, and where there should be opportunities both for important saving and for export potential.
The proposed closure at the Ravenhead factory, which as my hon. Friend said currently employs about 750 workers is, of course, a serious blow not only to Pilkington's and to St. Helens, but above all a direct and serious blow to all those men and women who work there. It is also, I know, a matter of concern to other workers employed in different sectors of the glass-making industry in St. Helens, who are naturally concerned about their jobs.
The glass manufacturing industry, of which Pilkington's forms an important part and on which St. Helens depends for almost one-third of its jobs, has, like other industries, been going through a difficult time in recent months. The present downturn in the building industry has led to a reduction in the demand for building glass and a reduced demand for cars has meant that less glass is needed for windscreens, while the situation in the British colour television industry has resulted in the proposed closure of the Ravenhead factory.
As regards the factors which have led to the closure, the proposed closure of the Ravenhead factory must to some extent be seen against the background of the current world recession in demand which has affected employment in virtually all industrial countries. This recession has affected employment in nearly


all industries in this country. Nevertheless, as my hon. Friend has pointed out, there were a number of special factors which have contributed to the proposed closure of this factory.
The whole production at Ravenhead in recent months has been devoted to the manufacture of glass parts for colour television tubes, and Pilkington's had invested heavily in equipping the factory. It did so at a time when there were thought to be good prospects of a growing market at home and abroad. Since then, the general recession both at home and abroad, together with the necessity in this country to reintroduce credit controls and more recently to increase VAT, has changed the situation markedly.
In addition there has, as my hon. Friend said, been a high level of imports of colour television tubes from Japan and more recently from the United States of America, and this again has adversely affected the market for Ravenhead's products. Because of this decline in the market requirements, the company had earlier cut back the number of employees to 750. Even so, the factory has continued to make heavy losses and the company could no longer see its way to continue production at the current low levels of throughput.
There have been the fullest discussions between the management and the unions since September 1974, and more recently with the Department of Industry, as to ways in which these difficulties could be overcome, but I am sorry to say that despite the most detailed investigations the Government saw no practical way of saving the Ravenhead factory. Accordingly, at a meeting on 1st July, the Minister of State, Department of Industry, my hon. Friend the Member for Rutherglen (Mr. Mackenzie) informed representatives of the management and workers that he could find no justifiable basis on which the Government could help to keep the factory in operation.
The management informed the shop stewards and union officials on 2nd July that there was no alternative to stopping the manufacture of glass parts on 11th July. This is now being considered by the several negotiating bodies. The factory has large stocks and will be kept open for several months, possibly until

March of next year, while the stocks are disposed of.
I cannot deal at length with all the matters raised by my hon. Friend because some of them, as he will recognise, are not within my field of responsibility. What I undertake is that those matters which I cannot deal with personally will be drawn to the attention of my hon. Friends in other Departments.
Our main concern tonight must be with the workers directly affected by the closure, and in the limited time available I want to say something about the employment situation in the St. Helens area, the prospects for those affected by the closure and the general measures the Government are taking to reduce unemployment.
Before doing so I shall comment on imports from Japan and the United States of America. It has been suggested that action should be taken to restrict the import of television tubes. As my hon. Friend knows, there are formidable difficulties in taking this course. Under international trading agreements such as GATT, to which we are a party, the imposition of import restrictions would require the offer of compensation to the countries affected or invite the risk of retaliation and escalation. Quite apart from this, the import of colour television tubes was only one factor in the complex situation surrounding the proposed Ravenhead closure, and action to restrict imports would not on its own have been a solution to the problem.
My hon. Friend knows that the Secretary of State for Trade has recently announced an investigation into the alleged dumping of imported television tubes, and he hopes shortly to announce the results of this investigation. I am sure that my hon. Friend's remarks will be drawn to his attention. My right hon. Friend also mentioned other forms of help which might be given, and my hon. Friend will be aware of the discussions which have taken place about help under the Industry Act.
My hon. Friend mentioned an employment subsidy to assist in keeping jobs available. The precise details of the temporary employment subsidy have yet to be finalised, and it is not, therefore, possible to say whether this factory will be eligible for payments when the TES


has been introduced. I hope that I am not out of order in saying that my hon. Friend might care to look at the report of the proceedings tonight on the Employment Protection Bill, where details of this matter are spelt out.
The general intention is that the TES scheme should relate to large-scale redundancies—this area has large-scale redundancies—in areas of high unemployment, and St. Helens is undoubtedly an area of high unemployment. The scheme is intended for situations where early recovery offers a sure prospect of economic employment in the firms concerned. In these cases it would obviously make good sense from every point of view that the workers should be kept in productive employment rather than become unemployed. In other cases the extra time can be used to arrange for their redeployment into more valuable jobs. When the scheme is introduced, doubtless Pilkington's will wish to consider whether it will be eligible for assistance and whether it wishes to apply.
My hon. Friend mentioned disclosure. He will understand that in redundancy situations of this kind my Department is most anxious that there should be the maximum disclosure, and the maximum discussion with the trade unions. It is for that reason that we are introducing in the Employment Protection Bill proposals about mass redundancies.
My hon. Friend referred to British Leyland Motor Corporation, and suggested that the corporation should buy more glass windscreens and other glass products from Pilkington's. He will be aware of the difficulties about competition and the problems that arise, but I am sure that his remarks will be studied by the appropriate Department.
I come back to what can be done for the workers who are affected. I understand that the production of glass for television screens at the Ravenhead factory ceased on 11th July. I understand that it is likely that a fair proportion of the 750 workers at present employed at Ravenhead will be offered jobs at other Pilkington factories at St. Helens, though this is still subject to discussion with the unions and is, of course, dependent on the demand for other glass products.
For those who do unfortunately lose their jobs, I should be less than honest if I did not say that redeployment prospects at the present time in St. Helens are poor. The current unemployment rate for St. Helens is 6·3 per cent. compared with 3 per cent. a year ago. It is estimated that about 3,000 jobs have been lost in the town since last September, and in the present economic climate openings are relatively few. However, although unemployment in St. Helens over the past year has increased I suppose it is a slight consolation to know that it is still lower than that of the Merseyside special development area of which it forms a part. St. Helens is, of course, heavily dependent on the glass-making industry and the Department of Industry is aware of the need to encourage other industries to move to St. Helens and to widen the existing industrial base.
As far as my Department is concerned, I need hardly say that all the facilities of the Manpower Services Commission will be available to help workers find new jobs and to provide training for those workers who wish to learn new or different skills. The local office of the Employment Services Agency has been in close touch with Pilkington's about this redundancy and a job team will be going to the factory shortly, along with representatives of the Training Services Agency, to give help and advice to any of the workers needing assistance.
There is currently a skillcentre at St. Helens, with about 220 places offering courses in a good spread of trades, and there are other skillcentres in the North-West where places will be available for St. Helens workers. In addition, about 100 places are currently available for courses under the Training Opportunities Scheme, mainly in clerical and commercial subjects, in the St. Helens College of Technology, and further short industrial courses leading to semi-skilled status are planned for St. Helens in the latter part of this year and in early 1976.
The need for training courses is kept constantly under review by the Training Services Agency and new courses are set up wherever practical. The ESA and the TSA are also running a seminar, shortly, for senior personnel staff in the Pilkington Group in St. Helens, to explain the wide range of services which the Department of Employment group can offer.
Finally, although I realise that it is of little immediate consolation to those affected by the closure of the Ravenhead plant, I should like to say something about the employment situation at Merseyside generally and the steps which the Government are taking to alleviate the present position.
The Government fully accept that unemployment in the St. Helens area is too high. St. Helens is part of the Merseyside Special Development Area and thus enjoys the full range of regional incentives. Nevertheless, Merseyside as a whole has for long experienced persistently high unemployment, despite the efforts of successive administrations to encourage the creation of alternative employment opportunities in the area. When the National Enterprise Board and the planning agreement system come into operation, we shall have an instrument whereby more can be done for areas such as this.
The current employment situation is exacerbated by the fact that the world is currently in the middle of a major depression and unemployment is high in all industrial countries. In order to alleviate the effects of current high unemployment, the Chancellor announced in April increased opportunities for training and retraining steps to assist people to

move to new employment and to strengthen the employment services and a plan for a temporary unemployment subsidy to help firms located in areas of high unemployment which face redundancies.
The Government are committed to bring down the rate of unemployment. They have been prevented from taking further action this year because of the excessive rate of inflation. The policy put forward in the recent White Paper "The Attack on Inflation" are designed to reduce inflation to a level where the Government can employ effectively all the weapons which they have at their disposal to end the present unacceptable level of unemployment. This the Government have pledged themselves to do.
As I said at the beginning, I cannot cover all the points which my bon. Friend has raised, some of which may involve other Department. I recognise the seriousness with which my hon. Friend views this situation and the sincerity which prompted him to raise this matter on the Adjournment. I shall ensure that the matters that I have not dealt with personally are considered elsewhere.

Question put and agreed to.

Adjourned accordingly at two minutes to One o'clock.